under the railroad retirement system is now over $184 per month and, ultimately, as more years of service and compensation may be credited can go much higher without any aid through further amendments. And such benefits under the Social Security Act are paid for at a total cost to employers and employees at present of 41/2 percent of payroll earnings up to $4,200 per annum, while the current taxload on the railroad industry and its workers is now 3 times as much or 121⁄2 percent on employee earnings up to $350 a month. Now with an increase in total tax contributions estimated to produce $200 million annually it is proposed to add another general advance of 10 percent in all benefits and to liberalize the act in other areas to the tune of $162 million per year. Thus in my simple arithmetic the current deficiency would be reduced from $170 million to $132 million or $46 million more than was certified in the sixth actuarial valuation. Of course there is the rainbow's end which indicates that on a level cost basis this $132 million deficiency would be reduced by $111 million to $21 million when contributions under the Railroad Retirement Act as proposed in this bill will again rise in 1970 and 1975 some 13 and 18 years hence. There are limits to liberalization and I think that that point has been reached long since in the railroad social-insurance system. To go further would inflict serious and unnecessary injury to a very important segment of the Nation's economy. The railroad retirement system had obtained, through taxing the railroads and their employees for its own special purposes 29.1 percent more revenues last year than 10 years ago. In this period it had increased its administrative expenses by 34 percent. It had raised the average annuity by 60 percent. It had increased the number of beneficiaries by 129 percent, and total benefit payments by as much as 216 percent. Now, Mr. Chairman, and gentlemen, the security of the railroad's social-insurance system is dependent entirely upon the welfare of the railroads. Yet, in striking contrast, the railroads handled last year about 10 percent less freight than in 1947 and, in fact, the amount of money that the railroads had left in 1956 to pay dividends to stockholders, many of them employees, and for capital expenditures to keep pace with the advances in technology and replenish the freight car supply among other things, totaled only $874 million, a sum just slightly more than the Railroad Retirement Board will pay out this year in total benefit payments and administrative costs under both acts. Now we hear a lot about the technological advances on the railroads and their effect. Further illustrating the railroad's problems are the indisputable facts that the 1956 revenue freight loadings decreased approximately 7 million cars from the total in 1947 or a loss equivalent to over 100,000 trainloads. And the number of passengers carried dropped to 431 million compared to 703 million in 1947 or another loss equivalent to some 270,000 average trainloads. You heard my colleague, Mr. Harper, describe to you the steps a man must move through to become an engineer. Take the situation concerning merchandise carloadings which have dropped practically 50 percent in the last 10 years. To handle merchandise or LCL freight requires a receiving clerk, a trucker, a stower, car sealer, and bill clerk at origin. The same personnel, plus a cashier is required at destination. Remember that please when you visualize that we are loading 3 million less LCL cars today than we did 10 years ago, and practically 5 million less than 15 years ago. While this downward trend of the railroad transportation system, the Nation's No. 1 reliance in peril or need, may not continue, and I do not concede in any way that the future of the railroad industry is dismal, I am all together against saddling the industry with additional obligations and heavier burdens. My objections to the proposed unjustified liberalizations apply both to the railroad retirement system and to the railroad unemployment-insurance system. From the year 1947 to the year 1956, for example, the average daily unemployment benefit rate rose by some 102 percent. Aside from these things our research staff, sincerely and entirely capable people, have shown the net cost of the railroad unemployment-insurance system, including the proposals in this bill but excluding, for comparative purposes, administrative cost and interest earnings, to be 4.07 percent of creditable payroll. The average contribution rate, they tell me, under various State laws in 1955 was but 1.18 percent. There is already a concerted effort throughout the land on the part of railroad management, railroad labor and the Railroad Retirement Board to relieve the unemployment situation through preferential recall of furloughees, placement of claimants in nonrailroad as well as railroad work, through occupational changes, screening of new entrants and in various other ways. The serious problems peculiar to the industry and of equal concern to its employees which have arisen in the last decade suggest that a complete reappraisal of the act would be timely and more appropriate. The cost of the proposals in these bills when added to the burdens otherwise imposed, such as augmented wages, health, welfare, and other benefits, would increase the railroads' operating expenses by as much as one and one-half billion dollars since 1954. And all this at a time when railroad management is exerting every effort and straining to combat unregulated and uncontrolled competition to recapture traffic losses, to maintain and improve the railroads' ability to serve the Nation in any need, to encourage investment in the industry, despite an average return over the past 10 years of only 3.74 percent and to safeguard to the maximum possible extent the welfare and security of the employees. Gentlemen, I sincerely urge that no favorable action be taken on these bills. The CHAIRMAN. Does anyone have questions of Mr. Healy? The CHAIRMAN. Mr. Mack. Mr. MACK. Mr. Healy, I notice that you wound up your statement. by stating that you favored no action on any of these bills. Mr. HEALY. On those two bills, specifically H. R. 4353 and 4354. Mr. MACK. May I conclude from that that you are in favor of some of the legislation that has been introduced? Mr. HEALY. No, sir, as my colleague, Mr. Harper told you this morning, and Mr. Habermeyer both, we are unanimously opposed to all other bills. Mr. MACK. You are opposed to all bills? Mr. HEALY. Yes, sir, we are a unit on all other bills. Mr. MACK. I was wondering if you had any views as to what should be done about that $169 million deficiency? Mr. HEALY. The President's statement, also the assurances of the Senate committee when S. 3616 was enacted last year, very clearly were concerned with the solvency of the fund. Neither contemplated any further increases or liberalizations in present benefits. Mr. MACK. What are your suggestions for making that solvent? Mr. HEALY. My suggestion would be that we take care of what has already been done, limit action to the wiping out of that deficiency of $169 million and stop there. Mr. MACK. In other words, you are in favor of increasing the contribution. Mr. HEALY. I do not see that any of us have any alternative. Mr. MACK. I have no further questions at this time. The CHAIRMAN. Does anyone else have any questions? Younger? Mr. Mr. YOUNGER. That deficit of $169 million, does that include the amount you owe social security? Mr. HEALY. It is figured in our actuarial study. Mr. YOUNGER. That includes the amount that you owe the social security? Mr. HEALY. Yes, sir. The CHAIRMAN. Mr. Moss. Mr. Moss. Do I understand, Mr. Healy, that it is your contention the present retirement payments are completely adequate? Mr. HEALY. Yes, sir. May I say a few words there? Mr. Moss. Yes, certainly. Mr. HEALY. This whole railroad retirement system and unemployment insurance system has a common root with the railroads. You cannot keep on increasing benefits and increasing taxes when your operating expenses and the percentage of business you handle are decreasing constantly. Mr. Moss. I think that is so elemental as to not require repeating. Mr. HEALY. That is right. Mr. Moss. That is quite an obvious fact. Mr. HEALY. That is right. Mr. Moss. But you are dealing here with men who are part of an overall society and you are competing. The railroads have to compete for manpower with other large employers. Do you feel that the railroad retirement system is keeping pace with the retirement systems available in other major American industries where you not only have the industry retirement but you have the benefits of social security or old age and survivor insurance available? Mr. HEALY. There are two answers to that. In the first place as I have tried to point out, and I think as the Chairman's statement, which you gentlemen have, shows the railroad retirement system is far superior to social security. That is No. 1. Mr. Moss. We will concede that. Mr. HEALY. No. 2, the railroad retirement system is federally administered, thereby making it Government-supervised, if you please. I don't know to what extent the industrial pensions are safeguarded. They are certainly not, in my opinion, as much as ours. I think we have adequate protection under the Federal laws. Mr. Moss. My question did not go to the degree of protection afforded the trust fund but rather to the competitive character of the benefits in a total package accruing to a retiree of the railroad system as compared to the total benefits accruing to a retiree of some of the other major industrial employers of this Nation. Mr. HEALY. Without exactly getting into detail, I would say that the railroad retired workers are in better condition today than any other workers. Mr. Moss. Now let me understand you correctly. It is your impression that the benefits available under the railroad retirement system are superior to those under other major employers when we take the total package including the industry retirement system plus social security? Mr. HEALY. That is right. That is my impression. Mr. Moss. Now is that just snap judgment or is it the result of an informed opinion after a study of the benefits available under other systems? Mr. HEALY. There was no particular study on my part. I have seen some comparative figures which so indicate, but I have had contacts and conversations with people under both systems who constantly say our retirement system is superior to others. Mr. Moss. I still want to emphasize that the final criteria would be the combined retirement available, well, we will say, under the private plan of some major utility, plus the social-security rights the employee has. Yours is a single package for retirement purposes. Mr. HEALY. To this extent, you mean it covers retirement, disability, survivors? Mr. Moss. No, I mean when the railroad employee retires after a lifetime of service in the railroad industry, that he has one retirement check while the employee of a major utility would probably have two, that of the company's system plus that of the Federal old age and survivors' insurance. Mr. HEALY. Now, I do not know. I would not want to answer that except to this extent. When I say supplemental, that is over and above what they get from social security and some figures I have seen do not indicate they would get a total more than $184.30 a month. Mr. Moss. There would be no point in pursuing this further unless you have some specific information. It would be my judgment that you are in error. Mr. HEALY. Well, I do not think so, but of course that is our prerogatives. Mr. Moss. That is right. Mr. HEALY. I believe I will still stick to mine. Mr. Moss. If you have figures I would appreciate them. Mr. HEALY. I will try to get them. Mr. Moss. That is all I have. The following letter was later received from Mr. Healy :) UNITED STATES OF AMERICA, Hon. JOHN E. Moss, Interstate and Foreign Commerce Committee, House of Representatives, Washington, D. C. DEAR MR. Moss: In my appearance before the committee during hearings on H. R. 4353, and pursuant to your request, I promised to obtain, if possible, a comparison of benefits under supplemental private pension plans with those under the railroad retirement system. It has been a slow and difficult task which accounts for my failure to respond earlier. In fact, none of the private plans is strictly comparable with the railroad retirement system, as they differ so markedly in eligibility requirements, types of benefits, formulas, etc. So far as we could determine on a comparable basis, retirement benefits for an employee, at age 65 with 30 years of service and level monthly earnings of $350 are: Bituminous coal operators: $208.50 ($100 and social security). Railroad retirement system: $205.20 (and sometimes social security). General Motors Corp.: $175 ($67.50 and social security). Goodyear Tire & Rubber Co.: $162.50 ($54 and social security). Except as to the railroad retirement system, all of the foregoing amounts include $108.50 benefits under the Social Security Act. On the other hand, beneficiaries under the railroad retirement system may, in addition, receive benefits under private plans and social security. The railroad system has many other advantages. 1. It is evident that the private plans are products of collective bargaining agreements and included in a package along with wage increases etc., as is true of certain health and welfare benefits in the case of railroad employees. I believe it appropriate to here mention that, under the Railroad Unemployment Insurance Act, in addition to unemployment benefits, railroad employees, contributing nothing to such fund, are provided with sickness, accident and maternity benefits. 2. The private plans are subject to various conditions and individual changes or terminations. The railroad retirement system can be modified only by congressional action. 3. The railroad retirement system provides for occupational disability at age 60 with 10 years of service or at any age with 20 years of service. Neither the private plans nor social security have provisions for occupational disability. 4. The railroad retirement system provides for total and permanent disability at any age after 10 years of service. The bituminous coal operators' plan has no provisions whatever. The others require 15 years of service. Social security is not available below age 55. 5. The railroad retirement system is an industrywide plan, while company plans apply to individual companies only. A railroad employee never loses his annuity rights under the railroad retirement system. He can transfer from one railroad to another, or depart from and return to railroad employment, and each period of service will be duly credited to his account. Under company plans, employees transferring to other employment typically forfeit their supplemental pension benefits when severing connections with the companies. 6. The railroad retirement system, United States Steel and bituminous coal plans are the only ones listed above which do not require compulsory retirement. I will appreciate your incorporation of this letter as a part of the record in the hearings on H. R. 4353 and related bills. Am sending copies direct, as noted, to Chairman Harris and to Mr. Elton J. Layton. With all good wishes, I remain, Sincerely, T. M. HEALY. |