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and paid for, deserves passage, and I urge your recommendation to that effect in the Senate.
I also think, Mr. Chairman, that your amendment to H.R. 3157 which would peg the taxable wage base of railway workers at the same level as that of social security, is a prudent and necessary proposal. We must preserve the actuarial soundness of the railroad retirement fund, to insure that retirees will not be in any danger of losing their hard-earned benefits. I am confident that the committee will consider your amendment very seriously, and I am hopeful that my remarks will aid you in this effort.
STATEMENT OF HON. WAYNE MORSE, A U.S. SENATOR FROM THE
STATE OF OREGON
The bill before us provides us with the opportunity to correct one of the anomalies in the Railroad Retirement Act which has plagued us for a long period of time. For years efforts have been made to rationalize the discriminatory treatment given to the annuity which the act provides for the wife of the pensioned railroad employee. Unlike any of the other annuitants and beneficiaries under the act, the wife alone is subject to restrictions which, in effect, deprive her of benefits which she may have earned in her own right as an employee under the Social Security Act. Only in her case does the law direct a reduction in benefit on account of any sums which may be due to her as an earned social security pension. If, during her earlier years, she worked in order to contribute to the family breadwinning, the social security pension paid to her in her senior years, small as it may be, is deducted from her spouse's annuity under the Railroad Retirement Act. Her sister who may have refused to work receives the full spouse's annuity without deduction of any kind.
Of what use, then, is an earned social security pension to the wife of a retired railroad employee? Attempts to explain to her why she may not receive both her social security check and her spouse's annuity; why one must be absorbed by the other have never been successful. She simply cannot understand why she should be denied in her 65th year, her full share of the retirement benefits which she herself had earned.
Most of us have had experience with this problem. These women, their husbands and their families write to us constantly in an effort to find out why they are exposed to this treatment and why nothing has ever been done to correct it. As the former chairman of this subcommittee, I can speak with firsthand knowledge of this continuing complaint since a large part of these unending inquiries inevitably are called to the attention of this subcommittee. Frankly, I have never been satisfied with the statutory provisions in this respect, and in my judgment, the committee has a real opportunity to provide long overdue relief for these people since the bill befcre it has already cleared one of the Houses of the Congress.
The problem which we face in our approach to the bill is one which has always presented itself as the real obstacle to this or to any proposal to improve or adjust the railroad retirement system. I refer, of course, to the ever-present actuarial deficit. To my knowledge, the railroad retirement system has always had an actuarial deficit of one kind or another, at least during the period of my service on this subcommittee.
AMENDING THE RAILROAD RETIREMENT ACT OF 1937
The valuation of the system is, of course, based upon actuarial assumptions, long-range in point of view. Since they are long-range, only the passage of time can tell us to what extent these assumptions may be in error.
The cruciai element in developing the actuarial basis for the valuation is the future level of railroad employment. Thus, we are told in the current actuarial valuation that reasonable variations in these payroll assumptions would reduce the actuarial deficiency to a 0.19 percent of the taxable payroll on the long side or to 0.78 percent on the short side. The actuarial deficit of 0.41 percent of taxable payroll which they adopted is based on a payroll assumption of $4.3 billion per year, representing a 10-percent drop from the payroll assumption in the eighth valuation.
We are also advised that an actuarial deficit of 0.5 percent of taxable payroll or less is well within the limits of actuarial tolerance. Thus, the fact that the actuaries have agreed upon a set of assumptions, particularly payroll assumptions, which would result in a deficit of 0.41 percent is no cause for alarm. According to the ninth actuarial valuation, the system is eminently sound as of this time.
I do not quarrel with any of the actuarial procedures employed in this valuation. Far from it, I think that the system is well administered and well run and that its actuaries are among the most eminent in the profession. I cite the above only to pinpoint the kind of problem with which we are dealing with in attempting to weight the equities inherent in this bill against the cost of the reform which the bill seeks to make.
This cost, we are told, will be $13 million on a level basis or, in other words, will amount to 0.30 percent of the taxable payroll. Since the bill does not provide for its own funding, this cost must necessarily be added to the existing actuarial deficit and will increase it from its existing level of 0.41 percent of taxable payroll to 0.71 percent. This is enough to cause any of us to hesitate. I think it is fair to say that this is the reason why the inequity of the restriction in the spouse's annuity has been permitted to continue.
However, we should point up the fact that the situation with which we are confronted is due primarily to the structural changes in railroad employment caused by the technological advances of the past decade. The impact of these changes upon the level of employment has been felt even more keenly in this industry than in most. This is what the work rules dispute of the first half of this decade is all about. Indeed, this is what most of the disputes in railroading are all about.
We have before us another aspect of this problem, no matter how small it may appear to be in the light of these other great employment issues which the industry knows only too well. It has been said time and again that the impact of technological advance should not fall on the employee alone. The costs of automaticn and technological advance cannot be imposed upon those who are dislocated by the changes
It is in the light of factors such as these that I must agree with the judgment of the House of Representatives that, on balance, the equities
of the bill must overweigh the small added cost to the system. I think we have reached that point and that we should no longer defer taking the necessary action to remove these discriminatory restrictions upon the wives of retired railroad employees. We must remember that, by and large, the railroad system comprises the entire pension system for the railroad employees and that the pensions are small enough.
STATEMENT BY HON. STROM THURMOND, A U.S. SENATOR FROM
THE STATE OF SOUTH CAROLINA
Mr. Chairman, I appreciate the opportunity to express my views in connection with H.R. 3157 which is now under consideration by this subcommittee.
I strongly support the purpose of this bill, which is to permit the spouse of a railroad employee to receive her full spouse's annuity under the Railroad Retirement Act concurrently with the receipt of social security benefits or railroad retirement benefits earned in her own right with no reduction in her spouse's annuity. Under existing law, social security benefits received by the spouse in her own right are deducted from her railroad retirement spouse's benefits. In short, this bill seeks merely to eliminate an inequity in the Railroad Retirement Act and allow a beneficiary under that Act to receive the full measure of other benefits to which she is entitled in her own right. The justice in this proposal is self-evident.
On January 15 of this year, I introduced similar legislation, S. 545. There is one significant difference in the bill which I had the pleasure of introducing and in the House-passed measure now pending before this subcommittee. The difference is that S. 545 makes a modest adjustment in the tax rates of the Railroad Retirement Act so as to compensate for the increased annuities which will flow as a result of the enactment of this bill, and H.R. 3157 does not change the rates presently in force. I want to point out briefly one caveat which I know this subcommittee will carefully consider in connection with the pending measure. As you know, the railroad retirement fund is presently experiencing a deficit of some $1972 million a year. The enactment of the pending measure without any adjustment in the tax rates would add approximately $14 million to this yearly deficit. The total yearly deficit would then be approximately $33million or 0.76 percent of taxable payroll.
Mr. Chairman, I know that we all recognize the necessity for keeping the railroad retirement fund on a sound acturial basis. This is imperative. It was pointed out during the debate on this measure on the floor of the House of Representatives that there is some difference of opinion among the actuaries as to what tolerance can be accepted and a sound fund still be maintained. It is generally conceded that if the tolerance goes over one-half of 1 percent of the taxable payroll, a danger point is reached. It is for this reason that I point out that the House-passed measure would create a yearly acturial deficit of some 0.76 percent of taxable payroll—a figure which borders closely on the unacceptable. I know that this com
AMENDING THE RAILROAD RETIREMENT ACT OF 1937
mittee will carefully consider this problem in its further study of the pending measure.
Once again, I thank the committee for the opportunity of presenting my views on this worthwhile proposal.
STATEMENT OF HON. JOSEPH M. MONTOYA, A U.S. SENATOR
FROM THE STATE OF NEW MEXICO
Mr. Chairman and members of the subcommittee, thank you for the opportunity to testify in behalf of legislation to remove discriminatory restrictions upon the wives of retired railroad employees. H.R. 3157 amends section 2(e) of the Railroad Retirement Act of 1937 to permit the spouse of a retired railroad employee to receive a spouse's annuity under that section concurrently with the receipt of social security benefits earned in her own right without reduction in the spouse's annuity. Under existing law, social security benefits received by the spouse in her own right are deducted from her railroad retirement spouse's benefits.
The bill before us provides us with the opportunity to correct one of the anomalies in the Railroad Retirement Act which has plagued us for a long period of time. For years efforts have been made to rationalize the discriminatory treatment given to the annuity which the act provides for the wife of the pensioned railroad employee. Unlike any of the other annuitants and beneficiaries under the act, the wife alone is subject to restrictions which, in effect, deprive her of benefits which she may have earned in her own right as an employee under the Social Security Act. Only in her case does the law direct a reduction in benefits on account of any sums which may be due to her as an earned social security pension. If, during her earlier years, she worked in order to help support her family, the social security pension paid to her in her senior years, small as it may be, is deducted from her spouse's annuity under the Railroad Retirement Act. Another woman who has not worked, receives the full spouse's annuity without deduction of any kind.
Under the present law, a woman who has never worked may receive a spouse's benefit under both railroad retirement and social security if her husband is entitled to dual benefits. However, her neighbor who earned a social security benefit in a lifetime of work and whose husband is covered by railroad retirement alone may not receive the full spouse's benefit under the Railroad Retirement Act because of the requirement that in her case her spouse's benefit must be reduced by her earned social security benefit.
Many similar bills have been introduced in recent years which did not become law because, although Congress seemed to be in sympathy with the objective of the bills, the railroad retirement system has always had an actuarial deficit of one kind or another which was said to alone be enough to make such legislation impractical. This problem of the ever-present actuarial deficit is still with us. Nevertheless, the alleged deficit is only a forecast based upon variable factors and is slight in any event. It has become my opinion that the need to correct the obvious injustice of the present system outweighs the cost of the reform which the bill seeks to make.
It is my understanding that approximately 41,000 spouses will benefit from this bill; 40,000 of whom are social security beneficiaries
and 1,000 of whom are railroad retirement beneficiaries. Enactment of this legislation is most assuredly in the public interest. It will correct a longstanding injustice and defects in our statutes and will do justice to many deserving citizens.
Finally, Mr. Chairman, I support your amendment to this bill which will set the maximum yearly wage base at the same level as that of social security. This is necessary if we are to preserve the financial integrity of the railroad retirement fund, and keep the deficit at a tolerable level. This is a sound fiscal move, and one which I am informed will add to the benefits received by future railroad retirees.
STATEMENT OF HON. JENNINGS RANDOLPH, A U.S. SENATOR FROM
THE STATE OF WEST VIRGINIA The legislation under consideration by the Subcommittee on Railroad Retirement would correct what I believe is a serious inequity in the Railroad Retirement Act insofar as the payment of wives' annuities are concerned.
Under present law the wife of a retired railroad worker is entitled to a spouse's annuity equal to one-half of the worker's annuity when she reaches retirement age. However, the spouse is denied her annuity if she also is entitled to a social security benefit which she has earned that is equal to or greater than the spouse's annuity. In cases where her own social security benefit is less than the spouse's annuity, she receives a railroad annuity equal to only the difference between the two amounts.
This provision of the Railroad Retirement Act unfairly discriminates against railroad workers' wives who have aided during their working years and thereby contributed to the family income by holding jobs in which they paid a portion of their earnings into the social security system.
The 1951 amendments to the Railroad Retirement Act, provided that the annuity payable to a railroad worker, a worker's widow, or his spouse must be reduced by the amount of any social security ben fit to which the annuitant was entitled. Earlier Congresses have eliminated the first two of these offset requirements. There remains only the 40,000 spouses of railroad workers, with at least several hundred of them living in West Virginia, against whom this reduction in annuity is imposed. I believe it is incumbent on the Members of the 89th Congress to remedy this inequity.
Opponents of the legislation have based their opposition principally on the cost factor, citing the current financial deficit in the railroad retirement system as tolerable but expressing serious concern over the additional cost of the proposed bill. We certainly must approach this proposal with fiscal responsibility. I believe the chairman of the subcommittee, Senator Pell, has done precisely that in the amendment he has proposed which would relate the maximum railroad retirement tax base to the maximum taxable social security wage base. This amendment eliminates any reasonable substantive arguments against the legislation.