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MINORITY VIEWS

H.R. 7200-RAILROAD RETIREMENT AMENDMENTS

The Railroad Retirement System is being raided. This has been said over and over again in the past few years while we went right ahead and paid additional benefits out of the fund without providing for increased payments to compensate. In fact, within a five year period the benefits under Railroad Retirement have been increased 52%.

*** from 1951 to 1970 the average monthly benefit for a retired single worker has increased from $90 to $194, or 116%. Adjusted for inflation, the real purchasing power of the benefit for the unmarried retiree has improved 44% since 1951. For a worker and wife, the average monthly benefit has increased from $141 in 1951 to $310 in 1970, or 120%. In constant purchasing power terms, the improvement has been 47% for the couple. (Committee Print "Excerpts from the Report of the Commission on Railroad Retirement," p. 7) At the rate we are going, present employees can look forward to an empty cupboard when it comes time for them to retire. Railroad employment has been declining steadily and must, if railroad operation is to remain economically competitive, decline still further. Present railroad employment is 604,000 while at the same time the system is supporting 985,000 pension beneficiaries.

This trend was recognized when the first of three so-called "temporary" increases to match Social Security increases was passed. The measure also contained a provision to create a Presidential Commission to study and recommend a basic restructuring of the system. That Commission reported late last year suggesting a two-tier system having as its basic tier the Social Security fund. All benefits over the above were to be supplementary, but the way to finance these additional benefits was not spelled out.

When the report was submitted it was readily evident that Congress would not have time to work out a restructuring by July 1, 1973, at which time the three temporary increases expire. Some kind of extension would be necessary. H.R. 7200 purports to serve in that capacity. It goes beyond this. There are very basic changes to the present system included in this legislation. Employee payments into the fund are reduced to those paid by Social Security coverage (5.8%), and this cuts. payments by individual employees by almost one-half. At the same time management agrees to take on this added cost and increases the management share by the 4.75% of wages, over and above present input for regular and supplemental pensions. Railroad companies have a future pension cost of 15.3% of total payroll. There is also the provision for immediate higher inflationary freight rates to the public. Yet the agreement still does not provide enough funds to cover the deficits which are accruing every day.

These changes set the stage for some very undesirable developments in any restructuring effort. By providing for immediate liberalization of basic benefits it presupposes what can and will be done in the permanent system. The introduction of the automatic freight rate increase removes any incentive to keep the system within reasonable bounds.

96-447 O 7328

Labor can demand any kind of benefit increases and management will have no reason to argue since the additional money will be directly stuck on the shipper and the public which has no vote in the matter.

Railroads generally have a very low profit margin and many of them, as we know only too well, are losing money steadily. Of the 70 major industries in the United States, railroads are at the bottom of the list in return of investment with a return of only 1%. In spite of this, railroad management agrees to a pension plan which provides much better benefits than those in most other industries. The Commission on Railroad Retirement reports:

Only about half of the workers in private employment in the United States are covered by private pension plans, and in the retirement area railroad workers do better than most of them. Analysis of pension plans indicate that in 1969 a 30-year career railroader whose monthly earnings would correspond to typical wages in blue collar industries covered by private pension plans already had considerably better retirement benefits than those in other private pension plans. Moreover, since 1969 railroad benefits have been raised (temporarily) 26.5%. Also, a study of income data shows that in 1970 the benefits of an unmarried retired railroad worker were higher than the benefits received by 8 out of every 10 single retirees from any type or combination of public and/or private plan benefits in the country, including social security. The benefits of a married retired railroader and his wife were higher than benefits received by 9 out of any 10 retired couples from any combination of similar benefits. (Committee Print "Excerpts from the Report of the Commission on Railroad Retirement," p. 14.)

Somewhere, sometime, pressures of such settlements must rip the economic fabric of the country. Inflation will never stop or even slow with such burdens being placed upon the consuming public. Food prices have gone up 49%. The farmer complains bitterly because only 6% can be attributed to rises in prices at the farm. The remainder is in distribution, and certainly a large proportion of that difference is represented by transportation and labor costs.

It is not wise hastily to rush to accept H.R. 7200 just because the parties to a labor contract negotiation saw fit to try it on the public for size. If some or all of the changes turn out to be consistent with a workable long-range plan, they can be accepted and incorporated into a future committee product. If they do not so turn out, they should not be already a part of Railroad Retirement law.

Again Congress is being asked to provide another temporary extension. There is no permanent financing. The deficiency grows greater. Let's consider the present railroad employees who may have no pension reserves when they reach age 65. Let's think of the public which will feel the pressure of higher freight costs. Let's recommit this bill and demand a permanent solution.

SAMUEL L. DEVINE.

JAMES N. COLLINS.
BARRY M. GOLDWATER, Jr.

APPENDIX B

Public Law 93-58

93rd Congress, H. R. 7357

July 6, 1973

An Act

To amend sections 3(e) and 5(1)(1) of the Railroad Retirement Act of 1937 to simplify administration of the Act; and to amend section 226(e) of the Social Security Act to extend kidney disease medicare coverage to railroad employees, their spouses, and their dependent children; and for other purposes.

87 STAT. 141

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 3 (e) Railroad Retireof the Railroad Retirement Act of 1937 is amended by striking out the ment Act of 1937, word "and" after clause (ix) in the second paragraph thereof and amendment. inserting after the semicolon in clause (x) in such second para- Kidney disease graph the following new clauses:

666

medicare.

86. Stat. 765.

(xi) years of coverage as defined in section 215(a) of the 82 Stat. 183 Social Security Act for an employee who has been awarded an 45 USC 2280. annuity under section 2 of this Act shall be determined only on 86 Stat. 410, the basis of his wages and self-employment income credited under 1333. the Social Security Act through the later of December 31, 1971, 42 USC 415. or December 31 of the year preceding the year in which his an- 45 USC 228b. nuity began to accrue; and (xii) in determining increment months for the purpose of a delayed retirement increase, section 303 (w) (2)(B)(ii) of the Social Security Act shall be deemed to read as follows: "such individual was not entitled to an old-age insurance benefit";"."

SEC. 2. Section 5(1)(1) of the Railroad Retirement Act of 1937 is amended

(1) by striking out from clause (ii) "shall not be adopted after such death by other than a stepparent, grandparent, aunt, uncle, brother, or sister;";

(2) by striking out from such clause (ii) "age eighteen" and inserting in lieu thereof "age twenty-two or before the close of the eighty-fourth month following the month in which his most recent entitlement to an annuity under section 5(c) of this Act terminated because he ceased to be under such a disability";

Child's annuity,

extension.

60 Stat. 733;

65 Stat. 688; 80 Stat. 1084.

45 USC 228e.

(3) by striking from the third sentence thereof "202(d) (3) or (4)" and inserting in lieu thereof “202(d) (3), (4), or (9)"; (4) by adding immediately after the seventh sentence thereof Reentitlement. the following new sentence: "A child whose entitlement to an annuity under section 5(c) of this Act was terminated because he ceased to be disabled as provided in clause (ii) of this paragraph and who becomes again disabled as provided in such clause (ii), may become reentitled to an annuity on the basis of such disability upon his application for such reentitlement."; and

Full-time

students,

42 USC 402.

(5) by adding the following new paragraph at the end thereof: "A child who attains age twenty-two at a time when he is a full-time student (as defined in subparagraph (A) of paragraph annuity. 7 of section 202 (d) of the Social Security Act and without the 79 Stat. 371; application of subparagraph (B) of such paragraph) but has not 81 Stat. 860. (at such time) completed the requirements for, or received, a degree from a four-year college or university shall be deemed (for purposes of determining whether his entitlement to an annuity under this section has terminated under subsection (j) and for purposes of determining his initial entitlement to such an annuity) not to have attained such age until the first day of the first month following the end of the quarter or semester in which he is enrolled at such time (or, if the educational institution in which he is enrolled is not operated on a quarter or semester sys

87 STAT. 142.

Kidney disease medioare.

86 Stat. 1463. 42 USC 426. 50 Stat. 307. 45 USC 2288.

Effective dates.

86 Stat. 1329.

60 Stat. 729; 65 Stat. 685. 45 USC 228e.

Ante, p. 141.

Pub. Law 93-58

July 6, 1973

of the course in which he is so enrolled or until the first day of the third month beginning after such time, whichever first occurs)." SEC. 3. Section 226 (e) of the Social Security Act is amended—

(1) by inserting "or would be fully or currently insured if his service as an employee (as defined in the Railroad Retirement Act of 1937) after December 31, 1936, were included in the term 'employment' as defined in this Act" after "(as such terms are defined in section 214 of this Act)" in 2(A) thereof;

(2) by inserting "or an annuity under the Railroad Retirement Act of 1937" after "monthly insurance benefits under title II of this Act" in 2(B) thereof;

(3) by inserting "or would be fully or currently insured if his service as an employee (as defined in the Railroad Retirement Act of 1937) after December 31, 1936, were included in the term 'employment' as defined in this Act" after "fully or currently insured" in 2(C) thereof; and

(4) by inserting "or an annuity under the Railroad Retirement Act of 1937" after "monthly insurance benefits under title II of this Act" in 2(D) thereof.

SEC. 4. (a) The provisions of this Act, except the provisions of section 1, shall be effective as of the date the corresponding provisions of Public Law 92-603 are effective. The provisions of clauses (xi) and (xii), which are added by section 1 of this Act, shall be effective as follows: clause (xi) shall be effective with respect to calendar years after 1971 for annuities accruing after December 1972; and clause (xii) shall be effective as of the date the delayed retirement provision of Public Law 92-603 is effective.

(b) Any child (1) whose entitlement to an annuity under section 5(c) of the Railroad Retirement Act was terminated by reason of his adoption prior to the enactment of this Act, and (2) who, except for such adoption, would be entitled to an annuity under such section for a month after the month in which this Act is enacted, may, upon filing application for an annuity under the Railroad Retirement Act after the date of enactment of this Act, become reentitled to such annuity; except that no child shall, by reason of the enactment of this Act, become reentitled to such annuity for any month prior to the effective date of the relevant amendments made by this Act to section 5(1) (1) (ii) of the Railroad Retirement Act.

Approved July 6, 1973.

LEG IS LATIVE HISTORY:

HOUSE REPORT No. 93-222 (Comm. on Interstate and Foreign Commerce).
SENATE REPORT No. 93-215 (Comm. on Labor and Public Welfare).
CONGRESSIONAL RECORD, Vol. 119 (1973):

May 31, considered and passed House.

June 15, considered and passed Senate, amended,

June 21, House concurred in Senate amendments.

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Mr. HATHAWAY, from the Committee on Labor and Public Welfare and on behalf of the Committee on Finance, submitted the following

REPORT

[To accompany H.R. 7357]

The Committee on Labor and Public Welfare and the Committee on Finance, to which was referred the bill (H.R. 7357) to amend section 5(1)(1) of the Railroad Retirement Act of 1937 to simplify administration of the act; and to amend section 226 (e) of the Social Security Act to extend kidney disease medicare coverage to railroad employees, their spouses, and their dependent children; and for other purposes, having considered the same, report favorably thereon and recommend that the bill do pass with amendments.

The committee amendment is in the nature of a substitute. The committee accepted the provisions of H.R. 7357, but added one amendment, which together with the provisions of H.R. 7357 were consolidated into the committee substitute. The new provision added by the committee was recommended to it by the Railroad Retirement Board. This amendment is technical in nature and conforms to the provision of present law which permits the Railroad Retirement Board to disregard postretirement earnings in computing the Social Security guaranty rate.

PURPOSE OF THE BILL

The bill has three major purposes: (1) to simplify administration of the social security minimum guaranty provision contained in section 3 (e) of the Railroad Retirement Act; (2) to liberalize the eligibility conditions for children's benefits under the Railroad Retirement Act to conform with the liberalizations provided in such benefits under the Social Security Act by Public Law 92-603, approved October 30, 1972; and (3) to extend kidney disease medicare coverage to railroad employees, their spouses, and their dependent children on the same basis as such coverage is now provided for persons insured

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