Mr. HARRIS. The States have nothing to do with your program at all?

Mr. LYON. No, sir.

Mr. HARRIS. Could you give us an estimate of what the increased cost might be from the present provisions of law to the additional benefits that you recommend here?

Mr. LYON. You are speaking again of unemployment insurance? Mr. HARRIS. Yes.

Mr. LYON. Well, the Board tells us, the Retirement Board, that the proposal made in this bill would probably result in increased payments of about 16 percent. Now, in the last fiscal year according to the Board's reports, there was about $97 million paid out in benefits under this unemployment insurance system. Part of that is due to unemployment caused by layoffs; part of it is due to unemployment caused by illness.

The total was about $97 million in the last fiscal year. If we apply an estimated 16 percent increase to that, we will get about $15,500,000 annually.

Mr. HARRIS. From what you have observed to date, it appears that the cost for the 1953-54 fiscal year will be in excess of the 1952-53 fiscal year?

Mr. LYON. It probably will. We have more unemployment at the present time than we normally have.

Mr. HARRIS. That is the reason I asked the question. Have you any information on that?

Mr. LYON. We have had a downturn in railroad business, and at the present moment we have quite a few people unemployed. I am optimistic about it; I believe the situation will improve shortly.

Mr. HARRIS. I was going to ask you that question. I wanted to know what you felt about the future. I assume that your answer is that you think probably, instead of the unemployment situation getting worse, it will be improved. Some of those, at least, who have been unemployed, will be given employment.

Mr. LYON. That is my belief, Mr. Harris, yes, sir.

Mr. HARRIS. Now, approximately $700 million is in the fund at this time for unemployment insurance?

Mr.LYON. That is about right, yes.

Mr. HARRIS. The carriers pay for this entire program, do they not? Mr. LYON. Yes.

Mr. HARRIS. And the rate now is one-half of 1 percent?

Mr. LYON. That is right.

Mr. HARRIS. And when the fund is reduced to $450 million, I believe, then the rate increases?

Mr. LYON. Yes, sir, to 1 percent.

Mr. HARRIS. And then if it is reduced to as much as $250 million, then the rate goes back to 3 percent where it was several years ago? Mr. LYON. That is right. There are some intervening steps there, but your statement is correct.

Mr. HARRIS. I observe here from looking at the Board's report, table "A", page 89, of the annual report of 1953, that the fund reached its peak in 1947-48. At that time, it had $956 million-plus. Since that time, it has gone down to approximately $700 million. That means, of course, that the fund is being reduced on an annual basis?

Mr. LYON. Yes, that result was to be expected, of course; when we made the change in 1948. You will recall that the fund was almost $1 billion. It was constantly increasing, and there seemed to be no need to collect that huge amount in reserves. The railroads were very insistent that that was the situation.

While we did not agree with them initially, we wanted to get an increase in retirement benefits; and the fact is we made a deal and we came to Congress and asked you to O. K. it. You did, unanimously. Mr. HARRIS. I think I recall that. It made it much easier for us, too. Mr. LYON. So it was expected that this fund would go down. We have, since 1948, been paying out more in benefits that we have been collecting, of course.

Mr. HARRIS. Well, has the fund goine down faster than we expected at that time?

Mr. LYON. Different people expected different things. I do not recall, myself, what predictions we made at the time.

Mr. HARRIS. But it certainly has not gone down to what would be considered an alarming degree?

Mr. LYON. By no means.

Mr. HARRIS. Thank you very much, Mr. Lyon.

That is all, Mr. Chairman.

Mr. ROGERS. If the gentleman will yield, Mr. Lyon, the excess of receipts over expenditures, what becomes of that. What kind of a fund is it put into?

Mr. LYON. You are speaking of the unemployment insurance account?

Mr. ROGERS. Yes.

Mr. LYON. Of course, at the present time, we have an excess of expenditures over receipts. But there is a reserve fund there which is drawing interest out of the United States Treasury.

Mr. ROGERS. What rate of interest is it drawing?

Mr. LYON. As to the unemployment insurance fund, it is the going rate of interest, around 22 percent interest. I am not an expert on that. But that is generally true. As to the retirement fund, it is a different story.

Mr. ROGERS. What is the status of the surplus that you have in the retirement fund?

Mr. LYON. We do not have a surplus, but we do have a reserve of about three and a quarter billion dollars. That reserve in the retirement fund is invested in 3 percent special-interest-bearing notes by provision of the law. We get 3 percent on that.

Mr. ROGERS. From the Government?

Mr. LYON. Yes, from the Government. That is an important part of the financing scheme of the whole system. Mr. ROGERS. That is all.

The CHAIRMAN. Are there any further questions, gentlemen? Mr. HESELTON. Could I ask a further question? In connection with this provision eliminating the national delegate service, I see it is estimated to cost $10,000. In the first place, I am uncertain as to why that would cost anything. It seems to me that that would be a saving rather than a cost.

Mr. LYON. Well, I think probably that estimate is because these people would not pay the contribution, that normally would be the case. In most of those cases, where they pay a contribution, the bene

fits are trivial or do not exist. So, perhaps it would cost a little bit. I do not know that I can explain it, but it is a very trivial thing; I think it can almost be ignored. I do not know whether there is a good basis for an estimate of $10,000 or not. There probably is, but I do not know. They are chiefly people that come to our meetings here in the United States from Canada. And they never have any credits under this system other than that. It applies only to those delegates of that kind, who are paid by the union for attending those meetings from sources in this country, you see.

Mr. HESELTON. It is difficult for me to see if you are going to eliminate a potential claimant why you would not have a saving rather than a loss. If this is adopted, there is no possible claim upon the retirement fund by these people. I would think that you would have a net saving involved.

Mr. LYON. Well, you may be right. I wish you would ask that question of the Retirement Board when they appear because these are their figures. And I do not believe that I can satisfactorily explain the question you raised.

Mr. HESELTON. I have one other question in connection with that. I assume that some sum of money has been contributed by these people under the provisions of the existing law. If they are going to be eliminated, is there not a certain equity in providing that they could receive back whatever they have paid in?

Mr. LYON. Well, what we propose here is that they stop paying in as of now.

Mr. HESELTON. Yes.

Mr. LYON. And not wipe out what has occurred in the past. What we want to avoid is the nuisance value of bookkeeping on the part of the Board and others concerned from this point on. We probably should have done it years ago, but we did not.

Mr. HESELTON. I realize probably it is a relatively unimportant matter in one sense, but it does seem to me that, if some of these people have paid a considerable amount of money in for which they are not going to receive any benefits, consideration should be given to letting them have that money back.

Mr. LYON. We are not wiping out their benefits that they have so far acquired. We only propose that this be discontinued. We are not wiping out the benefits they have acquired in the past. We only propose to stop collecting the contributions and stop giving the credit from now on.

Mr. HESELTON. As I understand it, very few of them have acquired any actual benefits because of the fact that they have not served in this capacity up to 120 days?

Mr. LYON. That is probably true.

Mr. HESELTON. Well, I suppose it is up to them to present their case to this committee if they think they are being injured by this provision. There is a further question that I would like to ask you.

I notice that the Retirement Board, in its report to the committee, apparently is divided, with Colonel Kelly and Mr. Harper filing a majority report, and Mr. Squire filing a minority report. But beyond that, I notice that Colonel Kelly seems to think that the formula recommended is new, more complicated, and would require considerably more administrative cost. As I understand it, he feels that the same results could be achieved by staying with the basic formula and revising the scale benefits upward.

I also note that he recommends it for the consideration of the commitee, the railroad labor organizations, and the carriers.

Has that suggestion of Colonel Kelly's been explored? If so, is there any comment you wish to make at this time about it?

Mr. LYON. Well, Mr. Heselton, I think, perhaps before you came in, I made a short statement about that. What I said, in substance, was that since preparing our general statement here, we have seen the report of the Board in the last 2 or 3 days.

We have not had enough time to study it as much as we would like; we have taken note of the very things you have mentioned. All of the unions want to look at the report closely and advise the committee what they think about it. But we are not prepared to do that right

now.

Mr. HESELTON. The majority do recommend an amendment, which would provide for some $500,000 on salaries and expenses to be set aside at the enactment date. Is it your opinion that the administration of the recommended formula would add approximately $500,000 to the annual administrative expense?

Mr. LYON. Well, I have no way of knowing. Of course, when we make a change of this kind, for a period of time, there is additional work involved in recertifications and people becoming eligible that were not before, and all of those things.

I

I have no basis of questioning what the Board has suggested. think that it is more of a technical matter than anything else about administration, and I see no reason why the committee should not favorably consider what they suggest about that.

Mr. HESELTON. Have you any present estimate as to when the committee would have the benefit of your comments on Colonel Kelly's suggestion?

Mr. LYON. Well, we will do it as rapidly as we can. Fortunately, a majority of our people are in Chicago, appearing before a Presidential emergency board; I think that they can hold some consultations there.

I think as to the Four Train and Engine Service Brotherhoods that they have representatives here in Washington that can deal with the matter. We want to examine it as quickly as we can; we want to examine it as thoroughly as we can. It should not take us too long.

Mr. HESELTON. That is all, Mr. Chairman.

Mr. HARRIS. Mr. Lyon, I would like to ask you about item 3, on that table in your statement, which contains a provision for the reduction of the eligiblity age for widows from 65 to 60. I have received, as every other member of this committee and I am sure the Congress has, a great many requests from people employed in the railroad industry for a consideration of reducing the eligibility age of retirement for the employee from the present age 65 to 60.

I am sure that your attention has been called to that interest on the part of a good many people.

Mr. LYON. Yes, sir.

Mr. HARRIS. I wonder if your group has had occasion to give consideration to that problem, and if so, what was the result?

Mr. LYON. Yes, we have considered that. It has been considered repeatedly over many years. We did so when we were formulating this program. One of the main considerations is, of course, the cost.

You perhaps recall the report of the joint committee on which you served and the cost figures that they gave on those things. There is this large volume here, that is, the report of the Joint Committee on Railroad Retirement Legislation. I think there are cost figures given therein, for all of those items, on page 525.

Mr. HARRIS. For the benefit of the committee, many of whom have not had opportunity to see that report, would you give us the cost, if you have it there, of such a change with reference to age requirements.

Mr. LYON. I think that I can. I should think that these figures might be slightly changed now if they were being made as of today. But they are substantially correct, I think.

Mr. HARRIS. We recognize that.

Mr. LYON. There is one item listed here

provide full annuities for employees who retire after 30 years of service regardless of age,

and the cost is 32 percent of payroll.

It would involve $175 million annually. There is another item that is listed

to provide full annuities for employees retiring with at least 30 years of service providing they have reached the age of 60.

That might be more directly what you are referring to.

The cost is quoted as 1.6 percent of payroll, or involving an annual cost of $80 million.

Now, even if everybody was in agreement among the railroad unions as to the desirability of having a retirement age of 60, a normal retirement age of 60, I think it is obvious, that it could not be financed; it would result in wrecking the system.

We have to be interested in permanence and permanent soundness of this system, not in the immediate welfare of those people who want to retire now or who have already retired.

Mr. HARRIS. My purpose of bringing this up at this time is due to the many requests that we have received favoring this proposal. I think there is a lack of understanding on the part of people as to what the cost of this proposal would be and just how it would affect this fund.

Mr. LYON. Well, of course, there are certain employees and certain groups that are organized to campaign for better benefits that bring about many of those letters that you receive.

Mr. HARRIS. Thank you very much.

The CHAIRMAN. Are there any further questions, gentlemen? If not, we thank you, Mr. Lyon, for your appearance before us. I would like to ask just one question.

Yesterday, one of the witnesses before us spoke in favor of the amendments that the bill proposes, with the exception of the increase in the tax base. Would it be possible to have these benefits which the bill provides without an increase in the tax base?

Mr. LYON. It would not, Mr. Chairman, without throwing the fund into an unbalanced condition which we would not recommend. The CHAIRMAN. Are there any further questions?

Mr. BEAMER. Mr. Chairman, I would like to refer just to one particular point. I think Mr. Dolliver touched upon it. Reference was made about the increase in the maximum creditable compensation from $300 to $350 per month. Now, I presume, Mr. Lyon, since