to 32 percent in the maximum tax rate on employers under the law. We suggest that the problems of financing the railroad unemployment insurance program should be solved before the account starts showing a deficit. The Bureau of the Budget advises that they have no objection to the submission of this report. Sincerely yours, JAMES T. O'CONNELL, Acting Secretary of Labor. UNITED STATES OF AMERICA RAILROAD RETIREMENT BOARD, Chicago, Ill., January 30, 1959. Hon. OREN HARRIS, Chairman, Committee on Interstate and Foreign Commerce, House of Representatives, House Office Building, Washington, D.C. DEAR MR. HARRIS: This is a report on the bill H.R. 1055, which was introduced in the House of Representatives by Mr. Roberts on January 7, 1959, and which was referred to your committee for consideration. The bill would amend the Railroad Retirement Act of 1937 to provide that pensions and annuities under this act would not be considered as "income" for purposes of the "income limitations" prescribed by section 422 of the Veterans' Benefits Act of 1957, under which non-service-connected disability pensions are not paid to "any unmarried veteran whose annual income exceeds $1,400, or to any married veteran or any veteran with children whose annual income exceeds $2,700." Enactment of the bill would make the present provision of section 20 of the Railroad Retirement Act almost wholly nugatory. This section, added to the Railroad Retirement Act by Public Law 746, 83d Congress, 2d session, 1954, permits any person to waive an annuity or pension to which he is entitled under that act, with the main purpose of this provision being to enable the annuitant or pensioner, by so waiving, to come within the income limitations specified in the veterans' laws and thereby qualify for a veteran's non-service-connected disability pension. There would, of course, be no need or purpose for any such waiver if the bill H.R. 1055 is enacted. The elimination of such waivers would cost the railroad retirement system a relatively small amount each year, but from an actuarial point of view this additional cost would be negligible. Otherwise, enactment of the bill would not affect administration of the Railroad Retirement Act or increase the benefits payable thereunder. Since the only effect of enactment of the bill would be the incidental one of eliminating the waivers referred to above, apart from the small cost to the system of this elimination, the Railroad Retirement Board takes no position with respect to the proposal. Inasmuch as hearings on bills to amend the Railroad Retirement Act have been set for February 3, 1959, this report is submitted without prior clearance with the Bureau of the Budget. A copy of the report is being forwarded to the Bureau of the Budget today and you will be informed of the views of that Bureau as soon as they are received. Sincerely yours, HOWARD W. HABERMEYER, Chairman. VETERANS' ADMINISTRATION, Washington, D.C., February 9, 1959. Hon. OREN HARRIS, Chairman, Committee on Interstate and Foreign Commerce, DEAR MR. HARRIS: Further reference is made to your request for a report on H.R. 1055, 86th Congress. The purpose of the bill is to exclude pensions and annuities received under the Railroad Retirement Acts of 1935 or 1937 in determining annual income of veterans seeking pension from the Veterans' Administration. A formal defect is noted. In lines 8 and 9 the bill refers to section 422 of the Veterans' Benefits Act of 1957, which was repealed by section 14(117), Public Law 85-857. Comparable provisions are now contained in 38 U.S.C. 522. Under chapter 15, title 38, United States Code, otherwise eligible veterans of World War I, World War II, or the Korean conflict may be paid a pension for permanent and total non-service-connected disability. The pension rates are $66.15 per month, or $78.75 if the veteran has received the basic rate for a continuous period of 10 years or reaches the age of 65. A rate of $135.45 per month is authorized in the case of an otherwise eligible veteran who is, on account of age or physical or mental disability, helpless or blind or so nearly helpless or blind as to need or require the regular aid and attendance of another person. Payment cannot be made if the veteran's annual income exceeds $1,400 if he is unmarried, or $2,700 if married or with minor children. Under title 38, United States Code, section 503, certain payments are excluded from the computation of annual income for disability or death pension purposes. H.R. 1055 proposes to extend the scope of excludable payments insofar as disability pension is concerned, by excluding pensions and annuities received under the railroad retirement acts. Curerntly, in determining annual income, such benefits are considered as income after their cost to the worker (as personal contributions to the fund) has been recovered by him. This contemplates that the entire amount of the worker's payments following retirement will be applied each year to amortize their cost, after which the entire payment will be considered as income. Congress has also enacted legislation which the Veterans' Administration does not administer but which has an important impact on the annual income provisions of our disability and death pension programs. Under these laws railroad retirement annuitants or pensioners, and others, may waive all or any part of their annuity or pension (and revoke such waiver at any time) so as to reduce income and thereby qualify for pension benefits. In view of the many unknown factors, it is not possible to furnish an estimate of the cost of the bill, if enacted. This bill, if enacted, would have the effect of permitting veterans ineligible for pension benefits because of excess income to become eligible therefor by not counting as income money available for their support. The authorization of such exclusions would not be in keeping with the basic purpose of the disability pension program to assist veterans who are needy, i.e., those who incomes do not exceed the limitations prescribed by law. In addition, the bill's enactment might well stimulate requests for similar treatment of railroad retirement payments by widows and children seeking non-service-connected death pension from the Veterans' Administration, as well as requests for comparable exclusions by persons receiving other governmental or private annuities. For the reasons indicated, I recommend that H.R. 1055 be not favorably considered. Advice has been received from the Bureau of the Budget that there would be no objection to the submission of this report to your committee, and that the Bureau concurs in recommending against favorable consideration of the bill. Sincerely yours, SUMNER G. WHITTIER, Administrator. U.S. RAILROAD RETIREMENT Board, Hon. OREN HARRIS, Chairman, Committee on Interstate and Foreign Commerce, House Office Building, Washington, D.C. DEAR MR. HARRIS: This is a report on H.R. 1374 which was introduced in the House of Representatives by Mr. Van Zandt on January 7, 1959, and which was referred to your committee for consideration. The bill would increase widows' insurance annuities under the Railroad Retirement Act of 1937, as amended, by 20 percent. The bill would not increase dependent widowers' annuities. The amendments would be effective with respect to widows' insurance annuities for months following the month of enactment of the bill. All recertifications required by the bill would have to be made by the Board without application therefor. The Board is opposed to the enactment of the bill for the following reasons: (1) The bill, if enacted, would increase the cost of the railroad retirement system by eight-tenths of 1 percent of payroll, or about $41 million a year. (2) The bill makes no provision for financing the additional cost which its enactment would entail. (3) The railroad retirement system cannot absorb the added cost because the seventh actuarial valuation of the railroad retirement system shows that the net level cost of benefits under the act is 16.68 percent of taxable payroll. Since the actual tax rate is only 12.50 percent, the present benefit structure already involves an actuarial deficiency of 4.18 percent of payroll which is equivalent to about $213 million a year on a level basis. (4) The effect of the enactment of the bill would be to increase the deficiency to 4.98 percent of payroll or approximately $254 million a year. The Board, accordingly, recommends that no favorable consideration be given to this bill. Inasmuch as hearings on bills to amend the Railroad Retirement Act have been set for February 3, 1959, this report is submitted without prior clearance with the Bureau of the Budget. A copy of the report is being forwarded to the Bureau of the Budget today and you will be informed of the views of that. Bureau as soon as they are received. Sincerely yours, HOWARD W. HABERMEYER, Chairman. U.S. RAILROAD RETIREMENT Board, Hon. OREN HARRIS, Chairman, Committee on Interstate and Foreign Commerce, House Office Building, Washington, D.C. DEAR MR. HARRIS: This is a report on the bill H.R. 3289, which was introduced in the House of Representatives by Mr. Dorn on January 26, 1959, and which was referred to your committee for consideration. The bill would amend the Railroad Retirement Act of 1937, as amended, in the following manner: 1. Full annuities would be payable after 35 years of service regardless of age or at age 60 after the completion of 30 years of service. 2. An alternative method of computing average monthly compensation for service before 1937 would be provided, to be used in cases where it would provide a higher monthly compensation than the method now provided. Under this alternative method the compensation paid the employee in the 5 calendar years (consecutive or otherwise) of the highest earnings before 1937 would be used. 3. The limit on creditable monthly compensation, but not on taxable compensation, would be raised to $400, but we assume not retroactively. Under present law, the limit is $300 a month per employee on all service before July 1954 with a limit of $350 thereafter. 4. The provision in the present law that if the "monthly compensation" computed under this subsection is not a multiple of $1, it shall be rounded to the next lower multiple of $1, would be eliminated. 5. The maximum spouse's annuity payable under section 2(e) of the act would be increased 10 percent, so that it would be equal to 110 percent of the maximum amount which could be paid to anyone, as a wife's insurance benefit under section 202 (b) of the Social Security Act as amended from time to time. The Board would be required to recertify all annuities and pensions which could be affected by any of the changes specified in the bill. The effective dates of the changes proposed are not expressly stated. Aside from any other consideration the amendments proposed in the bill would create administrative difficulties which would be almost insurmountable. First, it would be necessary to secure detailed earnings records for service before 1937, in order to find the 5 years of highest earnings as adjusted for the increased monthly limit on creditable compensation. Second, the Board would be required to recertify practically all employee annuities and pensions in force on the date of the enactment of the bill. Recertification would also be required for large numbers of spouses, joint-and-survivor, and survivor insurance annuities. All this would impose enormous burdens upon the Board and upon employers as well. Also, of course, in a large number of cases, old payroll records may no longer be available. The Board is opposed otherwise to the enactment of the bill for the following reasons: 1. The bill, if enacted, would increase the cost of the railroad retirement system by about 3.1 percent of payroll, or $158 million a year. 2. The bill makes no provision for financing the additional cost which its enactment would entail. 3. The railroad retirement system cannot absorb the added cost because a recent actuarial estimate shows that the net level cost of benefits under the act is about 16.68 percent of taxable payroll. Since the actual tax rate is only 12.5 percent, the present benefit structure already involves an actuarial deficiency of 4.18 percent of payroll, which is equivalent to about $213 million a year on a level basis. 4. The effect of the enactment of the bill would be to increase the deficiency to about 7.3 percent of payroll or $370 million a year. The Board, accordingly, recommends that no favorable consideration be given to this bill. Because of the special request for an immediate report on the bill, this report has not been cleared with the Bureau of the Budget. We are, however, forwarding to the Bureau today a copy of the report and we will inform the committee promptly of any comments by the Bureau. Sincerely, HOWARD W. HABERMEYER, Chairman. UNITED STATES OF AMERICA, RAILROAD RETIREMENT BOARD, Hon. OREN HARRIS, Chairman, Committee on Interstate and Foreign Commerce, DEAR MR. HARRIS: This is a report on the bill H.R. 3478, which was introduced in the House of Representatives by Mr. Lane on January 27, 1959, and referred to your committee for consideration. The bill would amend the Railroad Retirement Act of 1937, as amended, by providing that an employee who terminates his railroad employment and is not entitled to an annuity under section 2(a) of the act shall, upon application, be paid back, in a lump sum, with interest, the amount of all taxes paid by him under the Railroad Retirement Tax Act. Such railroad employment would not thereafter count toward benefits under either the Railroad Retirement Act or the Social Security Act. The Board is opposed to the enactment of the bill for the following reasons: 1. Refunds of employee contributions are contrary to universally accepted principles of social insurance. One of the basic features of a social-insurance system is compulsory coverage which does not permit an individual to withdraw from membership and thereby forfeit valuable benefit rights. 2. The option to receive a refund of retirement taxes would induce many railroad employees to make a choice which could prove to be unwise and which they would later regret. Such employees would not have the right to rectify their mistake, since the bill makes no provision for employees to repay the amount received and thereby reinstate their credits under the Railroad Retirement Act. It should be noted that the employee would not only forfeit his credits under the Railroad Retirement Act but also would in effect waive his seniority rights to return to railroad work. 3. The right of employees withdrawing from the railroad industry to a refund of their retirement taxes might create a precedent for extending the same right to other groups of employees. Furthermore, the refund of employee taxes would raise the question of equal treatment for employer contributions with respect to the same individuals. While the provisions of the bill itself do not present any serious threat to the financial soundness of the railroad retirement system, an extension of its provisions to cover employer taxes would seriously affect its financial conditions. 4. The administration of the refund provisions of the bill would involve a great deal of correspondence and lengthy computations. This would add considerably to the already heavy administrative duties of the Board. The Board, accordingly, recommends that no favorable consideration be given to this bill. Inasmuch as further hearings on bills to amend the Railroad Retirement Act have been set for February 16, 1959, this report is submitted without prior clearance with the Bureau of the Budget. A copy of the report is being forwarded to the Bureau of the Budget today and you will be informed of the views of that Bureau as soon as they are received. Sincerely yours, HOWARD W. HABERMEYER, Chairman. The CHAIRMAN. I observe a number of our new colleagues present with us today. At this time I am glad to recognize a member of this committee who is always very active in these matters, who wishes to make a statement for the record, Mr. Friedel. STATEMENT OF HON. SAMUEL N. FRIEDEL, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MARYLAND Mr. FRIEDEL. Mr. Chairman and members of the committee, I appreciate very much the opportunity to speak before this great Committee on Interstate and Foreign Commerce-on which I have had the honor to serve-in behalf of two bills which I have introduced dealing with amendments to the Railroad Retirement Act now pending before the committee. My first bill is H.R 765. It is identical with H.R. 6337, which I introduced in the first session of the 85th Congress. It provides that a survivor of a deceased railroad employee who is receiving a survivor annuity under the Railroad Retirement Act would be permitted to earn not exceeding $1,800 a year without losing his monthly survivor benefit. The present earnings limitation for survivor annuities is $1,200 in a taxable year. If an annuitant earns more than $1,200 in a taxable year his monthly survivor benefit is suspended for 1 month for every $80 or fraction of $80 which he earns in excess of the $1,200 in a year. This restriction applies only to beneficiaries under age 72. The $1,200 yearly earnings limitation on survivor annuitants was enacted in 1954 and became effective on January 1, 1955. In view of the increase in the cost of living which has occurred since that time, and in view of the increases in wage scales which have occurred, Í believe it is only fair to increase this earnings limitation to $1,800 a year. The cost of this amendment to the railroad retirement system is relatively insignificant, averaging approximately $2.5 million a year. The benefits to be derived from this amendment by the widows of deceased railroad workers is very large. These widows need the few extra dollars they can earn in outside employment. They should not be penalized by depriving them of a widow's benefit simply because they earn more than $1,200 a year. There is no earnings limitation at all on the retired railroad worker provided he does not go back to work for a railroad or for the last nonrailroad employer. I believe that my proposal to increase the earnings limitation to $1,800 a year is eminently fair and I hope that this committee will give favorable consideration to H.R. 765. My second bill, Mr. Chairman, is H.R. 3166. It is identical to your bill, H.R. 1012. In view of the excellent summary which you have aiready made of H.R. 1012 in your opening remarks it is needless for me to repeat a summary of the provisions of this bill. The 10 percent increase in retirement and survivor benefits which it provides and the increase in unemployment insurance benefits which it also provides, are very much needed by these groups of beneficiaries. They got no increases in benefits last year, whereas social security beneficiaries did get an increase. I am also happy to say that provisions are contained in this bill which provide for adequate financing of the proposed benefits. Enactment of this bill will place the rail |