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pensioners-see section 5(m) of the Railroad Retirement Act of 1937) used in computing their railroad retirement annuities (see section 3(a) (2) of the Railroad Retirement Act and also section 5(m) which refers to section 3(a) (2)) as the average monthly wage which is to be utilized in computing the increases provided by this section. In computing annuity increases provided by this bill, it would be assumed (pursuant to the provision enclosed in parenthesis which immediately precedes the first proviso of the new paragraph (6) of section 3(a) of the Act) that the eligibility conditions for benefit entitlement and the proportions of the primary insurance amounts payable under the law at the time of any social security benefit increase, were also present in the law as in effect prior to July 1, 1973. This provision would permit any annuity increase in a particular case to be computed, on the basis of the eligibility conditions, etc., in effect at the time of a social security increase, by comparing the social security primary insurance amounts table (contained in section 215 of the Social Security Act) in effect immediately after the benefit increase with the tables in effect on June 30, 1973. The differences between the two primary insurance amounts applicable to a given case would, after any appropriate proportions of primary insurance amounts are applied, be the amount of the increase. This increase would then be reduced by any appropriate age reduction factors provided by the Railroad Retirement Act—the parenthetical provisions“ (before any reduction on account of age)” contained in clauses (i) and (ii) of the first sentence of paragraph (6) of section 3(a) of the Act have the effect of disregarding any social security age reduction factors which would otherwise be applied in making guaranty provision computations. Also, the second sentence of paragraph (6) of section 3(a) would enable the Board to approximate primary insurance amounts if wages or compensation prior to 1951 are used in making any computation under that paragraph. Without this provision, the determination of the increase in such a case would be a time-consuming and expensive process. Railroad compensation records for years prior to 1947 and social security wage records for years before 1951 are maintained only in microfilm records and are not available on computer tape. It would, therefore, be necessary, in the absence of the provision in question, to extract and record annual totals for these periods by visual reference to microfilm records in each particular case.
SECTION 105 This section provides benefit increases for individuals receiving pensions under section 6 of the Railroad Retirement Act of 1937 and for individuals receiving annuities under the Railroad Retirement Act of 1935 if social security benefits should be increased in the period July 1, 1973, through December 31, 1974. The increases for such individuals would be computed in the same manner as the increases provided annuitants under the Railroad Retirement Act of 1937 by section 104 of this bill. However, since such individuals performed no railroad service whatever after 1936 and they would, therefore, not be eligible for social security benefits if railroad service after 1936
were covered under the Social Security Act, an average monthly wage is deemed for purposes of such computation.
SECTION 106 All recertification required by reason of the amendments made by sections 104 and 105 of this bill would, in accordance with section 106 of the bill, be made by the Railroad Retirement Board without application therefor. Such adjustments would be made even without express authorization; however, specific inclusion of this provision conforms to past practice in amendments providing for increased railroad retirement benefits..
SECTION 107 In accordance with the provisions of this section, representatives of employees and carriers will meet to consider all matters relating to the restructuring of the railroad retirement system, taking into account the report and specific recommendations of the Commission on Railroad Retirement, and will submit a report to Congress no later than July 1, 1974, setting forth their recommendations in this regard.
This section provides the effective dates of the amendments made by Title I of the bill.
The Committee added a proviso to section 108(b) of the bill providing that the shift in the incidence of tax under the Railroad Retirement Tax Act woud be delayed for certain described railroads. Under this amendment the increased employer taxes applicable to other railroads on October 1, 1973 will not apply to a limited number of railroads owned by steel companies and to certain dock companies until such time as these current labor contracts expire, or at such earlier time as the parties may agree. This delay for the so called “Steel Roads" would be made because these railroads currently have in effect, under collective bargaining agreements, supplemental pension plans covering their employees. Shifting the burden of payment of tax under the Railroad Retirement Tax Act with respect to these employees at this time would confer a windfall benefit on them, at the expense of the carriers involved. The Committee, therefore, concluded that the shift in the burden of payment of tax in the case of these employees should be postponed until such time as the collective bargaining agreements now in effect terminate or are renegotiated, whichever is earlier. In this way, future agreements can take into account the 4.75 percent decrease in employee taxes, which amount to an increase in take home pay for the employees, as well as the comparable increase in employer taxes.
TITLE II—AMENDMENTS TO THE INTERSTATE COMMERCE ACT
The purpose of section 201 is to allow railroads to increase their general level of inter- and intrastate rates to offset increases in costs resulting from increases in taxes under the Railroad Retirement Tax
Act, as amended by the bill. Under the procedure established to accomplish this purpose, the Commission must, within thirty days after the filing of a verified petition by a carrier or group of carriers, permit the filing of tariffs providing for increased rates to become effective not less than 10 nor more than 30 days from the date of filing. (Such increases may not take effect until the cost increases upon which they are based have themselves become effective.) The Commission may withhold permission to file tariffs if it finds that the proposed increase clearly exceeds the amount needed to cover the increases in costs, but otherwise once the tariffs are filed the Commission would have no authority to suspend them pending final determination. After such hearings as it shall deem necessary, the Commission shall authorize such permanent increases as are necessary to offset the increased costs described above in accordance with the standards applied by the Commission under the Interstate Commere Act. In the event that the increases authorized on a permanent basis are less than those initially allowed and collected, the carriers are required to refund the difference.
The section provides that the Commission shall require carriers which have been permitted or authorized increased rates under section 201, above, to make such increases as are established for interstate traffic concurrently effective on intrastate shipments. The intrastate increases thus required shall be deemed to have been prescribed under section 13(4) of the Interstate Commerce Act, as amended, and they shall be subject to the same refund provisions as described above.
SECTION 301 This section protects the validity of the remaining provisions of this bill, if enacted, should any provision, or its application in a particular case, be held invalid.
Chicago, Ill., April 27, 1973.
House Office Building, Washington, D.C. DEAR MR. CHAIRMAN: This is the report of the Railroad Retirement Board on the bill H.R. 7200, which you introduced on April 18, 1973.
The bill consists of three titles, the first of which would revise certain eligibility conditions for annuities under the Railroad Retirement Act, extend certain benefit increases under the Railroad Retirement Act which are now scheduled to expire on July 1, 1973, provide automatic railroad retirement benefit increases if social security benefits are increased during the period July 1, 1973 through December 31, 1974, and change the tax rates under the Railroad Retirement Tax Act. The second title of the bill would amend the Interstate Commerce Act to provide new procedures pertaining to certain rate adjustments for carriers subject to Part I of that Act. The third title of the bill would protect the remaining provisions of the bill, if enacted, should any provision, or its application in a particular case, be held invalid.
TITLE I-AMENDMENTS TO THE RAILROAD RETIREMENT ACT, THE RAILROAD
RETIREMENT TAX ACT, AND CERTAIN PUBLIC LAWS
Section 101 of the bill would amend paragraphs (2) and (3) of Section 2(a) of the Railroad Retirement Act to extend to male railroad employees the same eligibility conditions for unreduced age annuities as are now available for female employees, that is, eligibility for full retirement annuities at age 60 if they have completed 30 years of service. This provision for unreduced annuities for men would, in accordance with section 108(a) of the bill, be effective only with respect to annuities which first begin to accrue on or after July 1, 1974.
The purpose of section 102 of the bill is to reduce the railroad retirement tax rate on employees under the Railroad Retirement Tax Act (10.6 percent of taxable compensation) to the tax rate paid by nonrailroad employees for social security purposes (5.85 percent of taxable earnings) and to increase the tax rate on employer under the Tax Act (from 10.6 percent of taxable payroll to 15.35 percent of taxable payroll) to compensate for the reduction in the employee tax rate. This purpose would be accomplished by amending section 3201 of the Internal Revenue Code of 1954 (which levies taxes on employees for railroad retirement purposes) to provide that, effective with respect to compensation paid for service rendered after September 1973, the tax rate on employees thereunder will be equal to the rate of the tax imposed with respect to wages by sections 3101(a) and 3101(b) of the Code (which levy taxes on employees for social security benefit and medicare purposes, respectively). Section 3221 of the Internal Revenue Code (which levies taxes on employers for railroad retirement purposes) would also be amended so as, in effect, to increase the tax rate on employers, also effective with respect to compensation paid for services rendered after September 30, 1973, by the 4.75 percent by which the employees' railroad retirement tax rate would be reduced. Neither these amendments nor any of the other amendments made by section 102—these other amendments would make no substantive changes in the law; the amendment to section 3211 would merely conform the language of that section, which levies taxes on employee representatives, to the amended language of section 3201 and 3221-make any change in the current combined tax rates under the Railroad Retirement Tax Act.
Under present law, the 15-percent increase in railroad retirement benefits provided in 1970 by Public Law 91–377, the 10 percent benefit increases provided in 1971 by Public Law 92-46, and the 20 percent benefit increase provided in 1972 by Public Law 92–460 are all due to expire on June 30, 1973. These benefit increases were provided on a temporary basis because, due to the cost of permanent increases of this magnitude, it was believed further consideration had to be given to the nature and extent of the measures necessary to finance the desired benefit levels before such benefit increases could be provided on a permanent basis. Section 103 of the bill would amend the aforementioned public laws to extend the expiration date of the benefit increases to December 31, 1974. In this regard, in accordance with section 107 of the bill, representatives of employees and carriers will meet to consider all matters relating to the restructuring of the railroad retirement system, taking into account the report and specific recommendations of the Commission on Railroad Retirement, and will submit a report to Congress no later than July 1, 1974, setting forth their recommendations.
Sections 104 and 105 of the bill would provide for increases in railroad retirement benefits (other than annuities computed under the first proviso of Section 3(e) of the Railroad Retirement Act of 1937 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 retirement 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 percent 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 nonrailroad 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 formulas, and, therefore, annuities payable under the guaranty provision are automatically increased whenever social security benefits are increased. These sections would, with certain exceptions, 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 with the differences noted in the next paragraph. 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 Railroad Retirement Act. The spouse maximum provision referred to specifies that the maximum annuity payable under the Railroad Retirement Act to a spouse cannot exceed 110 percent of the maximum possible wife's insurance benefit payable to any wife under the Social Security Act.
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