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BACKGROUND

Section 3 (e) of the Railroad Retirement Act contains what 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. The implementation of this provision had become more and more difficult with each amendment to the Social Security Act since 1965, and, therefore, certain technical amendments to section 3 (e) of the Railroad Retirement Act were proposed in 1972 for the purpose of simplifying the administration of the guaranty provision. These amendments were enacted on October 4, 1972, as Public Law 92-460.

One of the amendments enacted by Public Law 92-460 added clauses (ix) and (x) to section 3 (e) of the Railroad Retirement Act. These clauses were added in order to relieve the Railroad Retirement Board of the burden of policing an employee's earnings record after his annuity had been awarded and of making recomputations to determine whether the guaranty provision would, in light of any such earnings, provide a higher benefit to the employee than the regular railroad retirement annuity formula. Since inclusion of the latest social security earnings generally did not result in an increase in the amount payable under the guaranty provision and since it is a rare case where inclusion of such earnings would result in an employee's annuity previously paid at the rate provided by the regular railroad retirement formula being transferred to the guaranty provision rate, clauses (ix) and (x) permit the Board to disregard the employee's earnings after retirement in computing his "average monthly wage". These provisions fully accomplished their intended purpose at the time of their enactment because under the then existing law the amounts of any benefits payable to an employee under the guaranty provision were related to the amount of his average monthly wage. Shortly thereafter, however, the Social Security Act was amended by Public Law 92-603 (approved October 30, 1972) to provide special minimum primary insurance amounts (section 215 (a)(3) of that Act) and so-called "increment month" increases (section 202 (w) of that Act), neither of which were related to the employee's average monthly wage. Therefore, clauses (ix) and (x) of section 3 (e) cannot, under present law, be applied in making guaranty provisions computations as to the amount of a retired employee's special primary insurance amount or increment increases, thereby defeating the purpose of those clauses to a significant extent. The provisions of section 1 of the bill would remedy this situa tion so as to fully effectuate the original purpose of the clauses in question.

When technical amendments were originally proposed in 1972 to simplify the administration of the guaranty provision of section 3 (e) of the Railroad Retirement Act, several provisions were included, the enactment of which was contingent upon the enactment of H.R. 1,

which was then being considered by the 92d Congress. Since it was believed that H.R. 1 would not be enacted in 1972, those provisions were deleted before the technical amendments of 1972 were enacted as Public Law 92-460. Subsequently, however, H.R. 1 was enacted, on October 30, 1972, as Public Law 92-603 and, therefore, the aforementioned provisions which were deleted from the 1972 Railroad Retirement Act technical amendments are included in this bill. The costs resulting from these provisions, together with the costs and savings. from the technical amendments previously enacted in 1972 and additional financial interchange gains because of the enactment of Public Law 92-603, balance out, so that no financial burden to the railroad retirement system would result therefrom.

In 1965, when the medicare program was established, persons age 65 and over who were insured under the Railroad Retirement Act were provided the same hospital insurance and supplemental medical insur- · ance benefits as persons insured under the Social Security Act. Again, when medicare coverage was extended in 1972 by Public Law 92-603, to disabled individuals under age 65, such coverage was accorded disabled railroad retirement beneficiaries on the same basis as to disabled social security beneficiaries. Public Law 92-603, however, also provided medicare coverage for certain individuals covered under the Social Security Act who need treatment for kidney disease, but, through an oversight, this provision failed to extend such benefits to individuals covered under the Railroad Retirement Act. This bill would correct that oversight. This provision was considered by the Committee on Finance, which has jurisdiction over the Social Security Act, and that committee submitted the following letter for inclusion in this report:

U.S. SENATE,

COMMITTEE ON FINANCE, Washington, D.C., June 7, 1973.

Hon. HARRISON A. WILLIAMS,
Chairman, Committee on Labor and Public Welfare, U.S. Senate,
Washington, D.C.

DEAR MR. CHAIRMAN: On June 1, H.R. 7357, a bill affecting persons covered under the Railroad Retirement Act, was referred jointly to the Committee on Finance and the Committee on Labor and Public Welfare. On June 5, the Committee on Labor and Public Welfare ordered the bill favorably reported with an amendment striking everything after the enacting clause and adding instead a committee substitute. The committee amendment, like the House bill contains an amendment to the Social Security Act, which is within the jurisdiction of the Committee on Finance.

Last year, as part of Public Law 92-603, the Congress agreed to cover under Medicare all those persons who are fully or currently insured under social security, and their dependents, if they are medically determined to have chronic renal disease which necessitates kidney dialysis or implantation. This coverage begins with the third month after the course of dialysis is initiated, and it terminates 12 months after implantation or 12 months after dialysis is terminated. Under the amendment, the Secretary of Health, Education, and Welfare is authorized to limit reimbursement for implantation and dialysis procedures to centers which meet requirements he prescribes, including

requirements for a minimal utilization rate and for a medical review board to screen the appropriateness of the patient for the procedure. The new coverage becomes effective June 1, 1973.

With the exception of this new provision, the Medicare law applies equally to social security beneficiaries and railroad retirement beneficiaries. However, last year's provision extending Medicare coverage to persons needing kidney implantation or dialysis omitted any reference to railroad retirement beneficiaries. H.R. 7357 would correct this omission by extending the new provision to persons under the railroad retirement program.

On June 6, 1973, the Committee on Finance met in executive session and agreed to favorably report this provision.

I would appreciate it if you would include this letter in the joint committee report that will be filed on H.R. 7357. With every good wish, I am

Sincerely,

CHAIRMAN.

REPORTS OF EXECUTIVE DEPARTMENTS AND AGENCIES

The report of the agency concerned with this bill is set forth in the appendix to this report. The bill was initiated by the Railroad Retirement Board and is supported by railroad management (Association of American Railroads) and railroad labor (Congress of Railway Unions and Railway Labor Executives' Association).

GENERAL EXPLANATION OF THE BILL

(1) Under present law the Railroad Retirement Board must take into account an employee's earnings in and after the year of retirement for some purposes in computing the amount of the benefit which would be payable to him under the social security minimum guaranty provision contained in section 3 (e) of the Railroad Retirement Act and must disregard such earnings for other purposes in making the same computation. The amendments made by the bill would require the Board to disregard such earnings for all purposes in making the guaranty provision computation as to the amount of the benefit which would be payable to an employee thereunder. (Section 1.)

(2) Some eligibility conditions for benefits under the Social Security Act were liberalized by certain provisions in Public Law 92603. Thus, a child's survivor benefit will continue after his adoption by anyone (in general, an adopted child's benefit entitlement previously continued only if he was adopted by a close relative); a survivor benefit will be paid to a child for a disability which began before age 22, instead of before age 18; a student child will continue to receive benefits after age 22 in some cases; and a dependent grandchild will be treated as a child of his grandparent. This bill would make the same liberalizations for annuities payable under the Railroad Retirement Act. The enactment of these provisions would also simplify administration of the guaranty provision of section 3 (e) of the act. In computing annuity amounts payable under this provision, the Railroad Retirement Board is required to include certain spouses and children even if such persons could not themselves qualify for railroad retire

ment annuities. The complications arising from the inclusion in the computation of the new categories of "ineligible persons" created by the provisions of Public Law 92-603 would be avoided by these amendments. (Section 2.)

(3) Section 2991 of Public Law 92-603 extended medicare coverage to individuals insured under the Social Security Act, their spouses, or their dependent children who need treatment for kidney disease. This bill would extend the same coverage to individuals insured under the Railroad Retirement Act, their spouses, and dependent children. (Section 3.)

SECTION-BY-SECTION ANALYSIS OF THE BILL

SECTION 1

Under present law, although the Board is required to disregard an employee's earnings in and after the year of retirement for most purposes when computing the amount of the annuity which would be payable to him under the social security minimum guaranty provision contained in section 3 (e) of the Railroad Retirement Act, it is required to include those earnings in determining whether his guaranty provision benefit would be higher if based on the special minimum primary insurance amount provided by section 215(a)(3) of the Social Security Act or in determining whether his guaranty provision benefit should be increased because of "increment months" as provided by section 202 (w) of the Social Security Act. The inclusion of such earnings for any purpose whatever in computing an employee's guaranty provision benefit is clearly contrary to the intention of the 1972 technical amendments made by section 1(d) (1) of Public Law 92-460 which added clauses (ix) and (x) to section 3 (e) of the Railroad Retirement Act. The purpose of those amendments was to free the Board from the burden of developing information as to the existence and amount of an employee's post-retirement earnings. Furthermore, the inclusion of such earnings does not, in most cases, benefit an employee annuitant because an annuitant who works after retirement would generally be entitled to a social security benefit, which would have to be deducted from the guaranty provision benefit which would otherwise be payable to him. Therefore, the guaranty provision benefit would not be paid in such a case because the annuitant would receive a higher railroad retirement benefit under the regular railroad retirement formula. To fully effectuate the intention of the 1972 technical amendments, the new clauses (xi) and (xii) added to section 3 (e) by section 1 of the bill would permit the Board to disregard postretirement earnings for purposes of all guaranty provision calculaions of an employee benefit.

SECTION 2

Amendment to section 5(1)(1) (ii). Of the two amendments made in clause (ii) of section 5(1)(1), the first would permit continuing a child's annuity if adopted by any person (whether or not that person was the child's stepparent, grandparent, aunt or uncle, brother or sister). The other would make possible the payment of a child's annuity on the basis of disability which began before age 22 instead of age 18. It would also permit a wife under age 62 (if her husband

has attained age 65 and has been awarded an annuity) or a widow under age 60 to become eligible for a railroad retirement annuity if she has in her care a child who becomes disabled between the ages of 18 and 22. Finally, it would permit a child to become reentitled to an annuity if, although he had recovered from his disability, he again became disabled before the close of the 84th month following the month in which his original entitlement to a child's disability annuity terminated because of recovery. These changes would correspond to the changes in the Social Security Act which were made by sections 112 and 108, respectively, of Public Law 92-603.

Amendment to the third sentence of section 5 (1) (1). Section 216(e) of the Social Security Act was amended by section 113 of Public Law 92-603 to include a dependent grandchild as a "child" and by adding paragraph (9) to section 202 (d) of such Act to establish the conditions under which the grandchild will be considered dependent. Since the conditions under which a grandchild is considered dependent differ from such conditions for other children, the amendment made to the third sentence of section 5 (1) (1) would make these conditions applicable for determination of rights to railroad retirement annuities. Amendment inserting a new sentence in section 5(1)(1). The new sentence to be added after the seventh sentence of section 5(1) (1) provides the conditions for reentitlement of a child to an annuity based on disability. This corresponds to a similar provision in section 108 of Public Law 92-603.

Amendment adding a new paragraph to section 5(1)(1). The new paragraph to be added at the end of section 5(1) (1) is directed to fulltime students. The purpose of this is to allow a child who is in school when he attains age 22, but has not received a degree, to receive a child's annuity through the end of the quarter or semester. This would correspond to the change in the Social Security Act which was made by section 109 of Public Law 92-603. Without this change, the Board would be required to terminate the annuity when the child attains age 22.

SECTION 3

As a result of the enactment of section 2991 of Public Law 92-603, an individual insured under the Social Security Act, his spouse, or his dependent children who need treatment (hemodialysis or renal transplantation) for kidney disease, are covered under medicare, beginning July 1, 1973, in the same way as beneficiaries age 65 and over or disabled beneficiaries under age 65. This section of the bill would amend section 226 (e) of the Social Security Act to extend the same coverage to railroad employees, their spouses, and their dependent children.

SECTION 4

This section provides the effective dates of the several provisions of the bill.

CHANGES IN EXISTING LAW

In compliance with subsection 4 of rule XXIX of the Standing Rules of the Senate, changes in existing law made by the bill as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets; new matter is printed in italic; existing law in which no change is proposed is shown in roman):

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