Amending the Railroad Retirement Act of 1937

The additional costs upon both employers and employees, both now and in the future, are entirely unwarranted by actual facts. For example, I do not recall any mention of the fact that annuitants on the rolls as of December 31, 1955, who retired at age 65 and over and who had some railroad service after 1936, contributed $240 million in employee-tax contributions and have received, already, benefits totaling $1,470 million-a ratio of $6 to $1; furthermore, when the value of future benefits are included, their ratio of benefits to contributions is almost 12 to 1.

That simply means, as stated in my initial appearance before you gentlemen, that currently active employees are carrying a large share of present costs of benefits to those who have already retired, or will shortly retire, and without contributing commensurately to the system. Presently active employees and future employees should not be asked to do more, especially as benefits under the Railroad Retirement Act are, generally, far above those granted under similar systems operated by the Federal and State Governments for other industries.

Nor should the industry, in the light of its financial problems as well illustrated in the record, and its terrific competitive losses under existing regulations, so clearly reflected in revenue freight carloadings and passenger traffic be saddled at this time with additional unwarranted obligations.

You gentlemen, nevertheless, face a specific task, based on certain assurances and commitments in the closing days of the last session of Congress, and, although I opposed then, as I do now, any further liberalization of the Railroad Retirement Act, I recommend that the tax assessment against both employers and employees be increased sufficiently to take care of that obligation in a new bill, and that S. 1313 be unfavorably reported.

I believe that the provisions of S. 1630 are consistent with the traditional American spirit of fair play. Employees contribute nothing to support the system. I recommend that the Railroad Unemploy ment Insurance Act no longer donate benefits to railroad employees, who voluntarily quit the industry, are discharged or suspended for misconduct related to their assigned duties, or for failure to fulfill their acknowledged obligations; are on strike against the industry

Senator MORSE. May I interrupt at that point, if my colleagues would permit me. It is true, is it not, that a grievance procedure exists so that an employee who is discharged for misconduct is entitled to all of the benefits?

Mr. HEALY. That is correct, and if he is reinstated he gets his pay. (Continuing:) are on strike against the industry, or any part of it, or who, not directly involved in such incidents, choose to remain away from their own duties; are eligible for immediate age or disability annuities under the Railroad Retirement or Social Security Acts; or do not perform their regular work because of pregnancy or its related ailments.

At this time, Mr. Chairman, I ask permission to incorporate into the record an exhibit showing that, through March 1 of this fiscal year, there were 6,198 employees discharged or suspended on 63 major railroads who claimed and received unemployment-insurance benefits aggregating $2,836,000, or an average of $458 each; 682 were individuals who reported for duty intoxicated; 639 were absent without leave; 442 failed to report for duty or to protect their assignments or

refused to accept call; 424 were released for violation of operating rules, 384 for their responsibility in accidents, 378 for nonpayment of union dues, 363 for commissions of felonies or misdemeanors or pilferage against the railroads or property in their possession; and the remainder for inefficiency, insubordination, negligence on duty, and other reasons.

Senator MORSE. The exhibit will be received into the record at this point.

(The document follows:)

Benefits paid to discharged and suspended railroad employees claiming unemployment insurance benefits from July 1, 1956, through Mar. 1, 1957

Source: Prepared by Bureau of Unemployment and Sickness Insurance, U. S. Railroad Retirement Board.

Mr. HEALY. In some earlier cases there were 2 employees each with over 17 years of service discharged on January 11, 1955, for noncompliance with union-shop agreements. These men drew benefits amounting to $1,725 and $1,942, respectively, under the Railroad Unemployment Insurance Act.

A veteran employee with over 30 years of service voluntarily quit on July 31, 1956, to enter the real-estate field. The alluring promises did not materialize, so that employee on January 11, 1957, applied for benefits under the Railroad Unemployment Insurance Act and collected $1,105. Since she worked in the first half of 1956, she can draw additional benefits under the Railroad Unemployment Insurance Act beginning July 1.

The technical analysis shows that in the last fiscal year only 300 employees received $63,000 in benefits under the Railroad Unemployment Insurance Act while on strike. Mr. Harrison told you this morning that from the beginning of that act through April 30, 1957, some $14 million was paid out. That is, roughly, $770,000 a year. At the present time there are 2 strikes underway which, in the past 2 weeks, cost the unemployment fund $26,000 in one and $475,000 in the

other for benefits to strikers and others affected by these work stoppages, and, if prolonged, the cost could easily amount to almost $2 million.

Now, an employee retired at 65 applied to one of our offices for annuity on October 22, 1955, and was told to apply for the highest sickness benefits and to defer his annuity date until March 1, 1956. The extent to which this practice prevails is evident in the fact that the technical analysis reveals that this provision of S. 1630 would conserve $12 million annually.

Now, here is the record of benefits actually received by a female employee in a western area under the Railroad Unemployment Insurance Act. From October 30, 1954, to January 16, 1955, sickness benefits for 52 days, amounting to $390. From January 17 to May 12, 1955, 116 days' maternity benefits at $975. From May 20 to June 30, 1955, 30 days of sickness benefits at $225. A new benefit year started on July 1 and from July 1 to 14 she collected $43.98. She returned to work July 15. She then drew vacation pay from the railroad for 2 weeks from August 15 to 26, 1955. She resigned on August 26, 1955, but claimed and received sickness benefit from August 27, 1955, to February 18, 1956, 124 days at $908.92. During her brief service, from July 15 to August 14, she earned $447.07, which qualified her for unemployment insurance, sickness insurance, and maternity benefits each in that amount in the year beginning July 1, 1956. So, on that date, she applied for and was paid sickness benefits amounting to $447.07, and then from October 10 to December 2, 1956, she again drew maternity benefits of $447.07, or a total of $894. Thus, for less than 1 month's active service over a period of 26 months, that employee received $3,437 in sickness and maternity benefits under the Railroad Unemployment Insurance Act.

Senator MORSE. May I interrupt you to say I will certainly be interested in Mr. Schoene's memorandum on that case.

Mr. HEALY. Of course, there can only be concord in the belief that benefits should be denied to voluntarily idle employees who refuse to accept suitable work offered, but there are two other areas not previously mentioned, as far as I can recall, on which I would like to offer the following comments and recommendations:

Section 4 (a-1 (i)) of the Railroad Unemployment Insurance Act provides, in effect, that any employee knowingly involved in any false or fraudulent statement or claim shall not receive benefits for 75 days. I recommend that such persons receive no benefits at all under the Railroad Unemployment Insurance Act for the balance of their benefit year. I see no reason for paying them any benefits from this fund to which they contributed nothing.

These are not isolated cases, as evidenced by our unemployment benefits found to be recoverable. The fraud count on a report dated in November 1956 for the Kansas City region was 128 cases; the report of January 18, 1957, in New York region had 342 cases; the March 7, 1957, report from the Atlanta region showed 305 cases; the April 22, 1957, Dallas region report revealed 172 cases; or a total in those 4 regions alone of 947 cases involving potential recoveries of $365,000. Now, under the Railroad Retirement Act, the administrative expenses of the Board are subject to review, approval, and specific authorizations by congressional Appropriations Committees. There is no such provision in the Railroad Unemployment Insurance Act.

93396-57——37

I recommend that the administrative expenditures under the Railroad Unemployment Insurance Act, be reviewed and determined on the same basis as under the Railroad Retirement Act.

I do not believe there can be any serious doubt as to the justice of the foregoing recommendations, which deprive no one of just benefits; tend to restore security and stability to a system created for the protection of true railroad workers, and are definitely in the interest of the public welfare.

We have had some discussions on section 12 (q). The Board at a cost of some $150,000 assembled a mass of data for a report to the Senate in 1947, and so far as I can determine it was never utilized.

Mr. Chairman, for these reasons I firmly believe that S. 1630 with the additional disqualification for fraud, the repeal of section 12 (q) and the placement of administrative expenses of the Railroad Unemployment Insurance Act under congressional supervision, should be enacted.

Senator MORSE. I thank you, sir. Thank you very much for your full statement. I am going to have it inserted in the record. Some of it you didn't read, and I think we should have the entire statement in the record.

(The statement follows:)

STATEMENT OF THOMAS M. HEALY, MANAGEMENT MEMBER, UNITED STATES RAILROAD RETIREMENT BOARD, IN REAPPEARANCE BEFORE SUBCOMMITTEE ON RAILROAD RETIREMENT, COMMITTEE ON LABOR AND PUBLIC WELFARE, UNITED STATES SENATE, PURSUANT TO INVITATION OF SENATOR WAYNE MORSE, CHAIRMAN

I sincerely appreciate your kind invitation and this opportunity to again appear before you.

The record of these hearings is replete with pro and con beliefs, technical data and interrogations.

I have the following comments and recommendations which I respectfully offer:

First, as to the proposed benefit amendments of the Railroad Retirement Act, under S. 1313. I firmly opposed those provisions as wholly unjustified and perilous to the security of the system. The additional costs upon both employers and employees, now and in the future, are entirely unwarranted by actual facts. Persons on the rolls have certainly not paid for their present benefits and the additional burden of increased benefits must be borne by taxes on others. For example, I do not recall any mention of the fact that annuitants on the rolls as of December 31, 1955, who retired at age 65 and over and who had some railroad service after 1936, contributed $240 million in employee tax contributions and have received, already, benefits totaling $1,470 million-a ratio of $6 to $1; furthermore, when the value of future benefits are included their ratio of benefits to contributions is almost 12 to 1.

That simply means, as stated in my initial appearance before you gentlemen, that currently active employees are carrying a large share of the present costs of benefits to those who have already retired, or will shortly retire, and without contributing commensurately to the system. Presently active employees and future employees should not be asked to do more, especially as benefits under the Railroad Retirement Act are, generally, far above those granted under similar systems operated by the Federal and State governments for other industries. Nor, should the industry, in the light of its financial problems as well illustrated in the record, and its terrific competitive losses under existing regulations, so clearly reflected in revenue freight carloadings and passenger traffic, be saddled at this time with additional unwarranted obligations.

You gentlemen, nevertheless, face a specific task, based on certain assurances and commitments in the closing days of the last session of Congress, and, although I opposed then as I do now any further liberalization of the Railroard Retirement Act, I recommend that the tax assessment against both employers and employees be increased sufficiently to take care of that obligation in a new bill, and that S. 1313 be unfavorably reported.

So far as the Railroad Unemployment Insurance Act is concerned, we oppose the proposal of S. 1313 and favor those of S. 1630.

(a) voluntarily quit the industry;

(b) are discharged or suspended for misconduct related to their assigned duties, or for failure to fulfill their acknowledged obligations;

(c) are on strike against the industry, or any part of it, or who, not directly involved in such incidents, choose to remain away from their own duties;

(d) are eligible for immediate age or disability annuities under the Railroad Retirement or Social Security Acts; or

(e) do not perform their regular work because of pregnancy or its related ailments.

Of course, there can only be concord in the belief that benfits should be denied to voluntarily idle employees who refuse to accept suitable work offered, but there are two other areas not previously mentioned, so far as I can recall, on which I would like to offer the following comments and recommendations:

1. Section 4 (a-1 (i)) of the Railroad Unemployment Insurance Act provides, in effect, that any employee knowingly involved in any false or fraudulent statement or claim shall not receive benefits for 75 days. I recommend that such persons receive no benefits at all under the Railroad Unemployment Insurance Act for the balance of their benefit year. I see no reason for paying them any benefits from this fund to which they contributed nothing.

2. Under the Railroad Retirement Act, the administrative expenses of the Board are subject to review, approval and specific authorizations by congressional appropriations committees. There is no such provision in the Railroad Unemployment Insurance Act. I recommend that the administrative expenditures under the Railroad Unemployment Insurance Act, be reviewed and determined on the same basis as under the Railroad Retirement Act.

S. 1313 proposes to increase daily benefit rates to 60 percent of gross pay even though the current schedule already automatically provides for "sharing in" the higher wage levels granted over the past several years. S. 1630 equitably fixes the benefit rate at 60 percent of take-home pay from last employment. This recognizes the greater needs of a family man, in periods of involuntary unemployment and sickness, and endeavors to give him a "better break."

S. 1313 proposes to increase the qualifying earnings from $400 to $500. Under the present minimum rate of pay that would require but 37 actual working days; S. 1630 sets a more realistic attachment to the industry with a requirement of 87 days employment.

S. 1313 proposes benefits for 5 years for some employees-an open invitation to refrain from any serious effort to secure other employment. S. 1630, on the other hand, provides immediately a measure of interim assistance to all bona fide railroad employees who suffer involuntary wage losses which is in accord with practically all other unemployment programs.

For these reasons, I firmly believe that S. 1630, with the additional disqualification for fraud and the placement of administrative expenditures of the Unemployment Insurance Act under congressional supervision, should be enacted. Senator MORSE. Senator Thurmond.

Senator THURMOND. Mr. Chairman, I have a few questions I would like to ask the Board Chairman.

As I understood you a few minutes ago, you said there is a deficiency of $170 million.

Mr. HABERMEYER. A year on a level cost basis.

Senator THURMOND. In other words, it is costing $170 million a year more to operate the Railroad Retirement Board than the income being derived from the taxes on the railroads and employees?

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