-4 under this public law cannot become effective until January 1, 1975. Therefore, the provision in this bill is merely to take care of the possibility that Congress will enact social secu- 5. The bill also provides that representatives of the employees The Senate version of the bill, as contained in S. 1867, differs from H.R. 7200 as it passed the House in the following respects: 1. The provision for extending the temporary increases to 2. December 31, 1974, would be amended effective January 1, 1975, if railroad labor and management fail to reach an agreement which In order to finance the permanent extension of the temporary -5 3. The representatives of the employees and carriers would have 4. to report their agreement to the Congress no later than March 1, 1974, rather than July 1, 1974, as in the House bill. The report would have to include firm recommendations in the form of a draft bill. The representatives of the employees and carriers would have to meet at least monthly, would be required to keep minutes of their meetings, and would have to include these minutes in the final report due on March 1, 1974. They would also have to file bimonthly reports to the Congress. I had hoped that by this time railroad labor and management would have come up with an agreement which would strengthen the financing of the railroad retirement program. However, realizing the complexities involved in arriving at such an agreement, I can appreciate why they have been unable to do so. As Chairman of the Railroad Retirement Board, I hope that the labor and management representatives will do all in their power to reach an agreement as soon as possible before whichever date is set for their report by the legislation. This is desirable in order to allay the concern of railroad employees. I believe that it would be unthinkable to remove the temporary increases. S. 1867 has a Part A which keeps these increases temporary, but Part B extends them permanently. Additional tax income equivalent to 7.50 percent of the taxable payrolls is also provided in Part B by having employees and employers each pay additional taxes equal to 3.75 percent of that part of the employees' earnings subject to taxation. Such additional taxes will become effective on January 1, 1975, the date on which the bill would make the benefit increases permanent. -6 The extension of the temporary benefit increases on a permanent basis after December 31, 1974, and the corresponding tax increases are probably intended only if the representatives of railroad labor and management could not reach an agreement which would be enacted into law by that time. Assuming that an agreement can be reached, these provisions would not become effective and would not cause any problem. As an If no agreement were enacted into law by December 31, 1974, we would again be in the position of having to terminate the temporary increases without Part B of Title I of S. 1867. This would be just as undesirable at that time as it is now. However, by that time the financial condition of the railroad retirement program would be extremely serious. actuary, I know that the longer corrective action is delayed the more serious the situation becomes, and the more drastic will be the solutions to the financial problems of the program. Therefore, providing additional income beginning in January 1975 will help to alleviate the situation. Further, the additional taxes provided by this bill would go a long way towards putting the program back into a sound actuarial position. On this basis, I believe it desirable to have the provision contained herein which would provide additional income of 7.50 percent of taxable payrolls to the railroad retirement program, but take no position as to how these should be apportioned between the employees and the employers. I realize the difficulties which this might cause, but as Chairman of the Railroad Retirement Board I must consider the ability of the program to meet its obligations. The provision shifting part of the employees' taxes to the employers really has no effect on the railroad retirement program, since the total -7 income received under the Railroad Retirement Tax Act would be the same. This is really more an element of collective bargaining than an element affecting the administration of the railroad retirement program. The provision, which would provide full annuities for men retiring at ages 60 or over with 30 or more years of service, will increase the long-term deficit of the railroad retirement program by about 1.25 percentage points of taxable payrolls, or $70 million per year. (This is a revised estimate based on the assumptions being used in the Board's 12th Actuarial Valuation, which is now in the process of being completed.) On the other hand, the additional taxes provided by S. 1867 (the 7.50 percent of taxable payrolls which will be divided evenly between the employees and the employers) would be sufficient to pay for this liberalization as well as enough to eliminate most of the present actuarial deficienc As stated earlier, the provision for automatic increases is effective only for the period from July 1, 1973, through December 31, 1974, a period during which no automatic cost-of-living increases under social security are scheduled. This provision is in the bill only for the contingency that some increase will be enacted for social security beneficiaries before 1975. The Congress should be in a better position to evaluate the likelihood of this occurring than anyone else. If a social security increase is enacted, the fact that the concurrent social security benefits payable to railroad retirement beneficiaries will be ignored under the automatic increase provision of H.R. 7200 would add costs to the program, which will not be reimbursed under the financial interchange between the railroad retirement and social security systems. The Board's Chief Actuary informs me that if the social security increase -8 were to be 10 percent, this additional cost would amount to $56 million a year. It should also be added that ignoring the concurrent social security benefit would help those individuals who are entitled to both social security and railroad retirement benefits but no others. If, however, the concurrent social security benefits were taken into account, this provision would provide the same dollar increases which railroad retirement beneficiaries would have received under tier one of the Commission on Railroad Retirement's two-tier proposal. Because of the temporary nature of this provision, and taking into account the current attitude of cooperation which exists between railroad labor and management, I feel that ignoring the concurrent social security benefits should not be considered a major objection to the bill. The provision in S. 1867, which would require the negotiators to keep minutes and report to the Congress, would have no direct effect on the railroad retirement program. Its purpose is to indicate to the Congress that progress toward a solution is being made. Since this might affect the discussions between the parties, I defer to the labor and management representatives on this provision since they are better versed than I in the art of negotiating. In closing, I would like to state my feeling that the March 7 agreement shows the willingness and ability of railroad labor and management to work in harmony. I also wish to reiterate that, in my judgment, it would be unthinkable to permit the expiration of the temporary benefit increases on June 30, 1973, the date scheduled in present law. Since June 30, 1973, is rapidly approaching, I would like to urge that Congress take prompt action on this bill. |