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. (The following statements were submitted for the record:)
STATEMENT OF HON. MELVIN C. SNYDER, A REPRESENTATIVE IN Congress FROM THE STATE OF WEST VIRGINIA
Mr. Chairman and members of the committee, my purpose in appearing before the committee is to ask for your favorable consideration of H. R. 6361, which amends the Railroad Retirement Act of 1937 in order to permit disabled employees to receive annuities irrespective of any earnings in service for hire or in selfemployment. The amendment is very simple in that it deletes from section 205, Public Law 572, the following sentence: “An employee, in receipt of such annuity, who earns more than $75 in service for hire, or in self-employment, in each of any six consecutive calendar months, shall be deemed to cease to be so disabled in the last of such six months; and such employee shall report to the Board immediately all such service for hire, or such self-employment.” The passage of this proposed legislation would permit disabled railway employees to receive their annuities, notwithstanding the fact that they earn more than $75 a month through self-employment or other employment. Today, the cost of living is high and the limitations of the existing law should be removed in order to help the disabled employees meet the high prices. I do not believe that management, labor, or any other group or individual, will contend that the removal of this restriction is not in order. It is certainly in order to increase the annuities of railway workers who are retired and those to be retired in the future. This is a step in the right direction. Likewise, the removal of the limitation as proposed in H. R. 6361 is in order.
STATEMENT OF HON. ELLsworth B. FootB, A REPRESENTATIVE IN Congress FROM THE STATE of CoNNECTICUT
Gentlemen of the committee, the present Congress has revised the Civil Service Retirement Act for the benefit of Federal employees. There is the same justification for the revision of the Railroad Retirement Act to improve the sickness, unemployment, and pension benefits of railroad workers. Everyone recognizes that the present pensions are inadequate to meet the present living costs. H. R. 5993 and H. R. 5875 appear to have the endorsement of the majority of the New York, New Haven & Hartford Railroad employees, residents of my congressional district, and some of them have endorsed H. R. 4695. I have not as yet received their official reaction to H. R. 6766 as introduced by your chairman. I know that the committee will give this matter very serious consideration and will report out what it believes to be a bill fair to all parties concerned. No statistics are required to prove the necessity for action at this session of the Congress. I am attaching hereto an analysis of the situation as prepared by Ernest F. Ackerman, 103 Winchester Avenue, New Haven, Conn., a prominent employee of the New York, New Haven & Hartford Railroad Co., which I believe this committee will find of interest. You will note that he concludes that the increase provided by H. H. 5993 is considerably less than that granted by the present Congress to civil-service employees.
ANALYsis As PREPARED BY ERNEST F. AcKERMAN, NEw HAven, CoNN.
Retirement fund—Statement showing tax collections and benefit payments for 3 months as reported by the Railroad Retirement Board
$126, 244, 720 $19,365, 671
January 1948---- 2,538,950 18, 850, 223 February 1948---------------------------------------------------- 6,499,479 19,056,282 135,283, 149 57,272, 176 -------------- 78,010,973 -------------- 135,283, 149 100 Total receipts, Jan. 1, 1937 to Feb. 29, 1948------------------------|-------------- 2,730, 187, 608 |-------Total benefit payments, Jan. 1, 1937 to Feb. 29, 1948--------------|-------------- 1,440, 413,432 53 Reserve fund balance, Feb. 29, 1948-------------------------|-------------- 1, 289, 774, 176 47
No Tax returns for class I railroads covering both carriers and employees contributions are made quarterly. Remarks.-The long-term reserve fund is equal to 47 percent of receipts, whereas the current reserve rate is equal to 58 percent of receipts. The 20 percent increase provided by H. R. 5993, if applied to the 3-month period, would boost total payments to $68,726,611, leaving $66,556,538 available for the reserve fund, which represents a 49 percent rate, or 2 percent better than the long-term rate. The figures used for this exhibit were obtained from the Railroad Retirement Board's official reports published in the February, March, and April, 1948, issues of the Monthly Review.
Unemployment insurance fund—Statement showing tax collections and benefit payments for 3 months as reported by the Railraod Retirement Board
Benefit payments Tax collections Amounts Percent December 1947--------------------------------------------------- $19,574,330 $5,605, 690 -------January 1948--- 320,834 February 1948---------------------------------------------------- 7, 510,349 Total------------------------------------------------------- 27,405, 513 17,044,084 62 Transferred to reserve fund---------------------------------------|-------------- 10,361,429 38 27,405, 513 100 Total receipts, July 1, 1939 to Feb. 29, 1948------------------------|-------------- 1,063,014,484 |-------Disbursements, July 1, 1939 to Feb. 29, 1948-----------------------|-------------- 152,985, 654 |-------Reserve fund balance, Feb. 29, 1948-------------------------|-------------- 910,028,830 -------
Remarks.-The 25 percent increase proposed by H. R. 5875 would boost benefit payments for the 3-month period to $21,305,105, leaving a balance of $6,100,408 for addition to the reserve fund.
The figures used for this exhibit were obtained from the Railroad Retirement Board's official reports published in the February, March, and April, 1948, issues of the Monthly Review.
1. Annuity at age 65.
2. Annuity at 60 after 30 years' service, but reduced one-fifteenth for each year under 65.1 There is no reduction, however, for women employees.
3. Annuity at 60 with no reduction if totally disabled, regardless of amount of service.
4. Annuity after 10 years' service if totally disabled.
5. Annuity at 60 if disabled for regular railroad occupation and currently connected with railroad industry.
6. Annuity after 20 years' service if disabled for regular railroad occupation and currently connected with railroad industry.
Civil Service retirement
1. Annuity at 62 with 15 years' service.
2. Annuity at 60 with 30 years' service.
3. Employees may retire at age 55 with 30 years' service on a reduced annuity.
4. Employees who are involuntarily separated after 25 years of Service may retire and receive an annuity reduced by one-fourth of 1 percent a month for each month the employee is under age 60.
5. Employees who leave the Federal Government prior to retirement age may not start receiving annuities until 62 years of age.
6. Retirement is compulsory at age 70 if employee has 15 years of service.
Note: "Discrimination or inequity now exists under the Railroad Retirement Act inasmuch as women with 30 years of service may retire on full annuities at age 60, whereas men with 30 years of service who retire at age 60 receive an annuity reduced by one-fifteenth for each year under age 65, equivalent to one-third of
Retirement yield of an average annual salary of $3,000 under the present Railroad Retirement Act, under H. R. 5993, and under the Civil Service Retirement Act
NotE.--The increase provided by H. R. 5993 is considerably less than the increase Congress has granted civil-service employees.
TESTIMONY OF RAILROAD PENSION CoNFERENCE, SUBMITTED AT HEARING IN WASHINGTON, D. C. on H. R. 4695
The Railroad Pension Conference, which is an organization of railroad workers of every craft on the major railroad systems, is deeply concerned in having the Railroad Retirement Act amended so as to provide retirement benefits of one half pay after 30 years of service. For that purpose we support and urge enactment of bills S. 2055-H. R. 4695. Bills S. 2055-H. R. 4695 would establish a comprehensive system, calculated to keep the younger men steadily employed, with the prospect of reasonable, steady, merited promotions, with the older men acquiring pension rights in time for reasonable benefit and enjoyment. There are various pension systems in different industries in which managements assume all of the major obligations by contributing a total or 3 or 4 percent to every 1 percent of the employees. (This supplementary to the social security benefits.) There are also many civil-service pension systems, (municipal, State, firemen, police, etc.), which give the employee an optional retirement of 20, 25 years of service, or age 55 or thereabouts, depending upon the rate of contribution chosen by the employee. Such retirement systems are comparaitively costly, and fund deficits incident thereto are absorbed by taxpayers. The employees thereunder are, however, beneficiaries of early retirement benefits. A railroader's occupation is as hazardous, and of such public value as to deserve, too, reasonably early retirement benefits, although we have not and do not propose benefits equal to the Civil Service standards mentioned. The railroad retirement system has several times increased retirement deductions made from the employee's wage without however, proportionately increasing the retirement benefits to the employee, except for a negligible number of women in industry whose retirement age was cut to 60. Several valuable benefits were gained under H. R. 1362 but did not affect the present retirement age— 1946: Rail workers earning $300 per month paid 3% percent—$10.50 per month. 1947: Rail workers earning $300 per month paid 5% percent—$17.25 per month. 1949: Rail workers earning $300 per month will pay 6 percent—$18.00 per month. 1952: Rail workers earning $300 per month will pay 6% percent—$18.75 per month. The railroad worker earning $300 per month whose tax has increased from 3% to 5% percent still receives no more than the maximum sum of $120 per month
By comparison, we point to the report of a broad survey conducted by the Bankers Trust Co. of 289 retirement plans, as reported in the Journal of Commerce of March 22, 1948, representing a substantial segment of the larger and more important programs adopted in industry during the last 5 years. In brief, the survey showed— - 1. Broader coverage. All employees in public utilities are covered (which can be compared to railroad service). 2. Four percent of all the concerns in survey pay the entire cost of such retirement plans. The most commonly used period of service continues to be 20 years, and vesting age of 55 seems increasingly more prevalent, as compared to the railroad retirement plan, where today an employee must be 65 years of age and have worked 30 years in the industry, to attain an average annuity of $70.53 a month (figures for March 1948), at a cost of 5% percent payroll contribution by carrier and emloyee each. The average quoted is from the latest (May 1948) issue of the ailroad Retirement Board's Monthly Review. The average railroad man feels sharply disappointed in the small retirement benefits he derives for the price he is paying, as compared to other industries. He is perfectly willing to continue paying his present charge, plus the additional 2 percent if for such payments he will obtain a half-pay annuity (based on his highest 5 years earnings), after 30 years of service (irrespective of age). Retirement after 30 years of service is urged so that benefits to an employee may be reasonably timely, and it is proposed that these benefits be based on the highest 5 years of earnings so that an employee's benefits upon retirement may be reasonable in amount as well as timely. Out of 100 railroad men— 30 years old, 33 will not live to 65 years. 40 years old, 31 will not live to 65 years. 50 years old, 26 will not live to 65 years. (These facts are revealed by the United States Railroad Retirement Board in its Press Relèase No. 48–5, dated April 12, 1948.) To understand why the railroad employee is getting comparatively so little in retirement benefits, we must review the unsound foundation upon which the railroad plan was launches. When the Railroad Retirement Act was enacted in 1937, the railroads were not called upon, as they should have been, to set up a fund to meet the cost of service credit earned prior to 1937. This cost has been, instead, carried by the working railroaders, and has been included in their contribution rates. The manifest unfairness of this is well set forth by Representative Robert Crosser in a letter from him to Representative R. J. Welch, dated January 27, 1947, wherein he states: “* * * And this agreed upon act was enacted on June 24, 1937. The agreement provided that the railroads were not to attack the constitutionality of the 1937 act, in consideration of the employees' agreeing (1) to share the costs of the system equally with the railroads (in the earlier 1934 act the employees had to bear only one-third of the costs), (2) to a reduction in the total taxes to be levied for the maintenance of the system, (3) to the system's taking over the previous obligations of the railroads to their former pensioners, and (4) not to seek legislation which would depart from the principle of sharing equally the costs of the retirement system (during the hearings on H. R. 1362, the railroads without any justification contended that this provision meant that railroad employees would never seek amendments to the act without the railroad's consent.) Thus the Railroad Retirement Act weathered the storm and became the established social security system for railroad emplovees in the United States. “It became apparent shortly after the Railroad Retirement Act of 1937 was enacted that the reduction of tax was too drastic and that the soundness of the fund resulting from the reduced tax revenues would be subject to serious question. This was due, in large part, to the assumption of the costs of prior service credit— an obligation of the railroads exclusively. When the Railroad Retirement Act of 1937 was enacted the railroads did not do what other major industries as well as the Federal Government did, when they established contributory retirement systems. The railroads did not set aside a fund, and did not arrange for an extra contribution on their part, as was done by all major industries and the Federal Government as to its own employees, in order to meet the costs of crediting service rendered before the establishment of the contributory retirement system. Because of this failure on the part of the railroad industry, there have been, and are being paid from the railroad retirement account in the Treasury, which consists exclusively of the equal contributions of the railroads on the one hand,
and their employees on the other, (1) not only the annuities which are based on railroad service since January 1, 1937, the date when the contributions began, but also (2) annuities which are based on the railroads' prior obligations, that is, the accumulated (pension credit) service before 1937, and (3) another of the railroads’ obligations, that is, the pensions, up to $120 a month, of all previously retired employees who were then on the railroads' private pension (gratuity) rolls. Since the obligations in the last two categories are those of the railroads only, they should have been borne by the railroads themselves; but railroad employees have paid, and are continuing to pay, one-half of these obligations. “Nevertheless, railroad employees have not sought any legislation which would change the scheme of an equal sharing of the costs of the railroad retirement system even though it became apparent, when the Supreme Court held the Social Security Act constitutional, that the court would sustain the Railroad Retirement Act against any attack on its constitutionality. “Even though this equal sharing was unfair to the employees since thereby they assumed a share of a burden which was not theirs at all, these employees did not move for a reduction of their costs. * * *” By comparison with workers of other industries, railroad workers are paying a much higher tax for comparative benefits. The high tax upon railroad workers results in part, as has been shown, from the fact that railroad employees have been saddled with the cost of management's prior obligation. An additional 2 percent from management toward the 30-year plan would not go to correct this past inequity, but might sustain the pension rights needed and wanted by all railroaders. The average railroader is very articulate in expressing his dissatisfaction with the present meager retirement benefits he receives. He feels that he is getting too little, too late, and paying too much for what he gets, if and when. He feels that he would far rather pay more, and get something worth while within his lifetime. He wants to keep his present disability, widows and children, and sickness benefits, but he also wants retirement benefits which can be used by him in his lifetime—and not remain statistical mirages. The average age of a person entering railroad service is 28–30 years of age. A 30-year pension would lower the average retiring age to 58–60, a reasonable age at which the gallop of life may be slowed to the canter of retirement. (From the Annual Report of Railroad Board, fiscal year to June 30, 1946, p. 123.) The Railroad Retirement Board has given us the factual information which we submit as evidence that our estimates of increased taxation in S. 2055-H. R. 4695 is sound. Since S. 2055-H. R. 4695 does not provide for widows' annuity, the portion of the letter dealing with the widows' annuity, should be eliminated and the 1% percent of pay roll to pay for this benefit should be subtracted from the total of 5% percent, leaving 4 percent to pay for the benefits contained in S. 2055-H. R. 4695. The 30-year half-pay pension bills H. R. 4695-S. 2055, introduced for the Pension Conference by Representative Clason and Senator McMahon, will cost only an additional 4 percent in taxation. Based on a 50–50 basis, the carriers will pay 2 percent and employees 2 percent. Prior to the introduction of our legislation, we checked our figures with Mr. Walter Matscheck, director of research of the Railroad Retirement Board. While the Pension Conference has always maintained that its proposals were sound, Mr. Matscheck’s letter quoted below fully supports our claims:
RAILRoAD RETIREMENT BoARD, OFFICE of DIRECTOR of RESEARCH, Chicago, Ill., February 11, 1947. Mr. CLARENCE B. CARTER, Chairman, Program Committee, Railroad Pension Conference, New Haven, Conn.
DEAR MR. CARTER: This is in answer to your letter of January 22. For convenience your new set of proposals to amend the Railroad Retirement Act is presented herewith: “1. Retirement after 30 years of service, regardless of age. “2. Annuity to be half of salary, but not to be lower than $50 per month. . . “3. Widows to receive half of amount of deceased, regardless of her age, unless she remarries, plus maintaining the annuity given to children under 18 years.of age as provided in the Crosser bill.” In making the necessary computations for this series of suggested amendments our acturial staff has made the following assumptions: