social security minimum-guarantee provision) in the period July 1, 1973, through December 31, 1974, if social security benefits are increased in that period. The increase would be the same dollar amount by which they would have been increased if the service and compensation on which the annuities are based had been employment and wages, respectively, under the Social Security Act. Such increase, however, would not result in increasing a spouse's annuity above the maximum spouse's annuity provided in section 2(e) of such Act and would not be reduced by any increase the beneficiary received in his social security benefit.

Under present law, rail carriers are faced with delay between the time they petition the Interstate Commerce Commission for a rate increase and the time when the increased rates are permitted to become effective. Experience also shows that delays occur in obtaining permission for intrastate increases to match the interstate levels. Because rate increases may only apply for the future, every day of time lag between the filing of a petition to increase rates to offset an increase in costs and the permitted applicability of those rates results in loss of revenue to the carriers. It is the purpose of title II of this bill to allow the railroads a more expeditious method of obtaining rate increases necessary to offset those cost increases which stem from railroad retirement tax increases provided under the bill.

SECTION-BY-SECTION ANALYSIS OF THE BILL

TITLE I-AMENDMENTS TO THE RAILROAD RETIREMENT ACT, THE RAILROAD RETIREMENT TAX ACT, AND CERTAIN PUBLIC LAWS

SECTION 101

Under present law men and women employees age 60 with 30 years of service are eligible for annuities, except that a man's annuity is reduced by 1/180 for each month that he is under age 65. Section 101 of the bill would eliminate this distinction between men and women employees by amending paragraph (2) of section 2(a) of the Railroad Retirement Act to refer to both as "Individuals" and by elimi-. nating entirely from paragraph 3 of section 2(a) of the Act the reduction provision for annuities based on age 60 with 30 years of service. The provision for unreduced annuities for men age 60 with 30 years of service would be effective with respect to annuities which begin to accrue on or after July 1, 1974. The reduction will continue in effect for both (as individuals) with respect to annuities based on age 62 with less than 30 years of service.

SECTION 102

The taxable payroll is the same under the railroad retirement and social security systems (in 1973, a maximum of $10,800 a year under social security and a maximum of $900 a month under railroad retirement). The tax rates (including 1 per cent of taxable payroll for medicare) is 10.60 per cent on railroad employees and employers alike,

and only 5.85 per cent under the Social Security Act. This section would amend section 3201 of the Internal Revenue Code of 1954 to tax railroad employees at rates provided by sections 3101 (a) and 3101 (b) of the Internal Revenue Code of 1954 (relating to employee and medicare tax rates, respectively, under the Social Security Act). The effect of this would be that employee railroad retirement tax rates would be reduced (effective with respect to compensation paid for services rendered after September 1973) by 4.75 per cent to 5.85 per cent.

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This section of the bill would also amend section 3221 of such Code to increase the current railroad retirement employer tax rate of 10.60 per cent by the 4.75 per cent by which the employees railroad retirement tax rate would be reduced, bringing the total employer railroad tax rate to 15.35 per cent (10.60 per cent + 4.75 per cent). This increase would carry out the intention of this section of the bill to maintain the current combined railroad retirement employee and employer tax rates (10.60 per cent + 10.60 per cent 21.20 per cent and 5.85 per cent + 15.35 per cent 21.20 per cent). Thus, subsection (a) of section 3221 of such Code would be amended to tax railroad employers at 9.5 per cent of taxable payroll and subsection (b) of such section 3221 would increase the 9.5 per cent by an additional tax of 5.85 per cent to a total of 15.35 per cent. The reason for dividing the 15.35 per cent into per cent plus the social security tax rate on employers (5.85 per cent) is to avoid the need for amending the Railroad Retirement Tax Act anytime the social security tax rate is changed.

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The employee representative tax is fixed by section 3211 of such Code at the combined railroad employee and employer tax rate (10.60 per cent on each 21.20 per cent). Under the amendments made by this section of the bill, the employee representative tax rate will continue to be 21.20 per cent (9.50 per cent + 5.85 per cent employer tax = 15.35 per cent, plus 5.85 per cent employee tax, totaling 21.20 per cent).

The purpose of all the other amendments made by this section of the bill is to make the changes effective with respect to compensation paid for services rendered after September 30, 1973, to bring some provisions up-to-date and to eliminate superfluous language.

SECTION 103

This section would extend the temporary increases in railroad retirement benefits by (i) 15 per cent under Public Law 91-377, (ii) 10 per cent under Public Law 92-46, and (iii) 20 per cent under Public Law 92-460. All these increases are under present law due to expire on June 30, 1973. This section of the bill would extend these temporary benefits to December 31, 1974.

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.

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SECTION 104

This section would provide for increases in railroad retirement annuities under the Railroad Retirement Act of 1937 (other than annuities computed under the first proviso of section 3 (e) of the Act which are automatically increased whenever social security benefits are increased) in the period July 1, 1973, through December 31, 1974, if social security benefits should be increased in that period.

The amount of any such increase in railroad retirement benefits would be determined through computations made pursuant to the first proviso of section 3 (e) of the Railroad Retirement Act, which is generally referred to as the social security minimum guaranty provision. This provision guarantees that the combined monthly railroad benefits which an individual and a dependent deriving benefits from him will receive under the Railroad Retirement Act and the Social Security Act (based on the individual's earnings record) would be no less than 110 per cent of the amount which would have been payable to that family under the Social Security Act on the basis of the individual's combined railroad and non-railroad earnings if his railroad service after 1936 had been covered under the Social Security Act.

In accordance with this guaranty provision, annuities are computed under the social security formulas whenever they produce a higher rate than the regular railroad retirement formula, and, therefore, annuities payable under the guaranty provision are automatically increased whenever social security benefits are increased. This section would, with certain exceptions, noted below, provide individuals whose railroad retirement annuities are computed under the regular railroad retirement formulas with the same increase they would have received if their annuities had been computed under the guaranty provision. Subsection (a) would add a new paragraph (6) to section 3(a) of the Act which would provide the above-described increases in the amount of each regular employee annuity under the Act.

Subsection (b), paragraph (3), would add a new paragraph to section 2(e) of the Act to provide similar increases in spouses' annuities, which increases would be computed in the same manner as the increases provided employees under the new paragraph (6) of section 3(a) of the Act. In no case, however, would a spouse's annuity be increased to an amount in excess of the maximum spouse's annuity provided in the first sentence of section 2(e) of the Act. (The spouse maximum provision referred to specifies that the maximum annuity payable under the Railroad Retirement Act to a spouse cannot exceed 110 per cent of the maximum possible wife's insurance benefit payable to any wife under the Social Security Act.) By virtue of any increase in the employee's annuity provided by the new paragraph (6) of section 3(a) of the Act, the spouse's annuity would be increased before the increase provided by the new paragraph of section 2(e) unless a specific provision precluding such a result is included. To avoid this duplication of increases in spouses' annuities paragraph (1) of this subsection of the bill provides that spouses' annuities would not be increased through any raise this bill would effect in employees' annuities.

Subsection (c) of section 104 would amend section 2(i) of the Act to insure that the amount of the spouse's annuity against which offsets

are applied as to the 1966 and 1968 benefit increases, because of corresponding social security benefit increases in 1965 and 1968, is the amount of the spouse's annuity before it is increased under the provisions of the new paragraph added to section 2 (e) of the Act by subsection (b) of this section of the bill.

Subsection (d) adds a new subsection (q) to section 5 of the Act to provide increases in survivor annuities which would be computed in the same manner as the increases provided employees under the new paragraph (6) of section 3 (a) of the Act. The purpose of the proviso of this new subsection (q) is explained in item 1 of the following paragraph.

As has been noted, there are several exceptions to the general statement that individuals whose annuities are computed under the regular railroad retirement formulas would receive the same increase they would have received if their annuities had been computed under the guaranty provision. These exceptions are:

1. In computing the amount of the increases, clauses (i) and (ii) of the new paragraph (6) of section 3(a) of the Act provide that the language in the guaranty provision which adds 10 per cent to the amount which an individual would have received under the Social Security Act if railroad service after 1936 had been covered thereunder is to be disregarded. The same result is accomplished in cases involving widows or widowers who receive annuities based on disability under section 5(a) (2) of the railroad Retirement Act by the proviso of the new subsection (q) of section 5 of the Act, which changes the percentage figure in the guaranty provision from 90.75 per cent to 82.5 per cent for this purpose (the 90.75 figure is equal to 110 per cent of the 82.5 figure). Thus, the increase provided by this section will be equal to 100 per cent, rather than 110 per cent, of the amount of the increase the individual would have received under the Social Security Act.

2. In determining the amount of an annuity under the guaranty provision, certain individuals who are not eligible for benefits under the Railroad Retirement Act, particularly children of living employees, must be taken into account. Thus, the annuity payable to an employee (and, in some cases, to his spouse) under the guaranty provision may include the amount which would have been paid to his child, or children, under the Social Security Act if railroad service had been creditable thereunder. Inclusion of the ainounts which would have been payable under the hypothesis of the guaranty provision to persons not eligible for benefits under the Railroad Retirement Act is precluded for the purpose of determining the annuity increases provided under this section by the first proviso of paragraph (6) of section 3(a) of the Act. Pursuant to that proviso, only the social security benefits which would have been payable to the railroad retirement annuitant himself are taken into account in determining the amount of the annuity increase. It might be added that a serious administrative problem would be presented if the first proviso were not included in this section because the Board's records would not, for the most part, contain information as to the children who would be entitled to social security benefits in cases involving employees whose annui

ties are computed under the regular railroad retirement formula. Therefore, information as to such children would, in the absence of the provision in question, have to be developed in each case before the amount of any increase under this section could be determined.

3. In computing the amount guaranteed a railroad retirement annuitant under the guaranty provision, the amount of any social security benefit which the annuitant is receiving is deducted. The third sentence of the new paragraph (6) of section 3 (a), however, provides that, for purposes of computing the annuity increase thereunder, any social security benefits to which the annuitant may be entitled shall be disregarded. Accordingly, the fact that a particular annuitant is also receiving social security benefits (which would have been increased pursuant to the legislation giving rise to the annuity increases under this section) would not affect the amount of his railroad retirement annuity increase.

4. Certain railroad retirement annuitants would not meet the requirements for eligibility for benefits under the Social Security Act, and, therefore, would not be eligible for benefits under that Act even if railroad service after 1936 were covered thereunder. In order to provide an increase in such cases, the annuitants would be deemed to meet the social security benefit requirements. Thus, (i) individuals receiving benefits under section 2(a)2 of the Railroad Retirement Act (those age 60 with 30 years of service) are deemed to be age 65, the age at which individuals are eligible for unreduced age benefits under the Social Security Act, since section 2(a)2 annuitants receive unreduced railroad retirement annuities, such annuitants were deemed to be age 65, rather than age 62, in order that any increases to their annuities would also not be subject to age reductions; (ii) individuals receiving reduced age annuities under section 2(a)3 of the Railroad Retirement Act who are under age 62 are deemed to be age 62, the minimum age at which wage earners are eligible for reduced age benefits under the Social Security Act-despite the amendments which would be made by section 101 of this bill, men age 60 with 30 years of service will still receive reduced age annuities if their annuities began before July 1, 1974; (iii) all railroad retirement disability annuitants would be deemed to meet the disability requirements of the Social Security Act as of the date their railroad retirement disability annuities began to accrue this provision will largely benefit annuitants under section 2(a)4 of the Railroad Retirement Act whose annuities are based only on disability for work in their regular railroad occupation, since the Social Security Act does not provide disability benefits for those who are not disabled for all regular and gainful employment; and (iv) individuals receiving annuities under the Railroad Retirement Act which are not based on a sufficient amount of railroad service after 1936 to provide, along with any social security credits the employee may have, an insured status under the Social Security Act if railroad service after 1936 were included thereunder, would be provided increases by treating the average monthly compensation or the average monthly earnings (as in cases involving widows of