Under the equitable doctrine that what one pays for, one should receive, these restrictions, one by one, were stricken from the act. Today, all have been repealed but one, the one which applies to beneficiaries who are wives or husbands of retired railroad workers. This legislation would repeal this last restriction. The restriction against railroad spouses is the rankest sort of discrimination, defying the most artful rationalization. Why should a man or woman who happens to be the husband or wife of a railroad worker be treated differently than a spouse of another worker? The same social security taxes have been paid in the two cases. If one is to receive less benefits than the other, then why should his taxes not be less? H.R. 3157 eliminates this discrimination by guaranteeing that when payments are made into two separate retirement systems, benefits will be forthcoming from both systems.

Mr. Chairman: H.R. 3157 is similar to H.R. 12362 which passed the House last year too late for the Senate to act before adjournment. According to the actuaries, the deficit involved is only thirty-two one-hundredths of 1 percent of taxable payroll. While this legislation provides no tax increases to provide additional revenue to the fund, I agree with the statement in the unanimous bipartisan committee report last year that "the equities involved in this legislation are sufficiently compelling to justify the small added costs to the railroad retirement system.'

The relief granted by this bill will benefit 40,000 wives and husbands (of retired railroad workers) who have earned social security benefits on their own work record. It will also benefit 1,000 wives and husbands (of retired railroad workers) who have themselves worked for the railroad and earned railroad retirement benefits on their own right.

I am most gratified that this distinguished subcommittee was able to schedule hearings so promptly this year. This, I am sure, foreshadows early action by the full committee and the Senate. In the absence of the need for a conference, this legislation should be available for the President's signature before sine die adjournment this year.

Senator PELL. I would also like to submit for the record the amendments that I have offered which will be included at this point. (H.R. 3157 amendments referred to follow:)

AMENDMENTS TO H.R. 3157 OFFERED BY SENATOR PELL

On page 1, change the period at the end of the preamble to a comma and insert thereafter the following: "to amend the Railroad Retirement Tax Act and for other purposes."

On page 1, strike out line 3 and insert in lieu thereof:

TITLE I-AMENDMENTS TO THE RAILROAD RETIREMENT ACT OF 1937

"SEC. 1.

Subsection (e) of section 2 of the Railroad Retirement”. After line 7, insert the following:

"SEC. 2. (a) Subsection (a) of section 3 of the Railroad Retirement Act of 1937 is amended by striking out 'the next $300' and inserting in lieu thereof the following: 'the remainder up to a total of (i) $450, or (ii) an amount equal to one-twelfth of the current maximum annual taxable "wages" as defined in section 3121 of the Internal Revenue Code of 1954, whichever is greater'.

"(b) The second sentence of subsection (c) of such section 3 is amended by inserting before', shall be recognized' the following: 'and before the calendar month next following the calendar month in which this Act was amended in 1965, or in excess of (i) $450, or (ii) an amount equal to one-twelfth of the current maximum annual taxable "wages" as defined in section 3121 of the Internal Revenue Code of 1954, whichever is greater, for any calendar month after the month in which this Act was so amended'.

"SEC. 3. (a) Subsection (f) (2) of section 5 of such Act is amended by inserting after 'so amended' where it appears the second time in the first parenthetical phrase after clause (vi) the following: 'and before the calendar month next following the month in which this Act was amended in 1965, and in excess of (i) $450, or (ii) an amount equal to one-twelfth of the current maximum annual taxable "wages" as defined in section 3121 of the Internal Revenue Code of 1954, whichever is greater, for any month after the month in which this Act was amended'.

"(b) Subsection (1) (9) of section 5 of such Act is amended

"(1) by striking out 'and' where it appears the fourth time;

"(2) by inserting after 'so amended' where it appears the second time the following: 'and before the calendar month next following the calendar month in which this Act was amended in 1965, and any excess over (i) $450, or (ii) an amount equal to one-twelfth of the current maximum annual taxable "wages" as defined in section 3121 of the Internal Revenue Code of 1954, whichever is greater, for any calendar month after the month in which this Act was so amended';

"(3) by striking out ‘after 1958 is less than $4,800' and inserting in lieu thereof 'after 1958 and before 1966 is less than $4,800, or for any calendar year after 1965 is less than an amount equal to the current maximum annual taxable "wages" as defined in section 3121 of the Internal Revenue Code of 1954';

"(4) by striking out '$450' where it appears the second time and inserting in lieu thereof '(i) $450, or (ii) an amount equal to one-twelfth of the current maximum annual taxable "wages" as defined in section 3121 of the Internal Revenue Code of 1954, whichever is greater,'; and

"(5) by inserting before, by (B) the following:' and before 1966, and an amount equal to the current maximum annual taxable "wages" as defined in section 3121 of the Internal Revenue Code of 1954, for years after 1965'.

"(c) Subsection (1) (10) of section 5 of such Act is amended by striking out '$450' and inserting in lieu thereof (i) $450, or (ii) an amount equal to one-twelfth of the current maximum annual taxable "wages" as defined in section 3121 of the Internal Revenue Code of 1954, whichever is greater'."

In line 8 on page 1, strike out "SEC. 2.

4.

This" and insert in lieu thereof: "SEC.

The provisions of sections 1, 2, and 3 of this".

In line 9 on page 1, insert "and deaths occurring" after "accruing".
On page 2, after line 9, insert the following:

"TITLE II-AMENDMENTS TO THE RAILROAD RETIREMENT TAX ACT "SEC. 201. Sections 3201, 3202, 3211, and 3221 of the Railroad Retirement Tax Act are each amended by inserting after the phrase 'or $450 for any calendar month after the month in which this provision was so amended', wherever such phrase appears in such sections, the following: 'and before the calendar month next following the calendar month in which this provision was amended in 1965, or (i) $450, or (ii) an amount equal to one-twelfth of the current maximum annual taxable "wages" as defined in section 3121 of the Internal Revenue Code of 1954, whichever is greater, for any month after the month in which this provision was so amended'.'

Senator PELL. Our first witness today is Mr. Donald Beattie, executive secretary of the Railway Labor Executives' Association, who I understand has an engagement. And so for that reason, we hope you will come forward.

STATEMENT OF DONALD S. BEATTIE, EXECUTIVE SECRETARYTREASURER, RAILWAY LABOR EXECUTIVES' ASSOCIATION

Mr. BEATTIE. Mr. Chairman and members of the subcommittee, my name is Donald S. Beattie. I am the executive secretary-treasurer of the Railway Labor Executives' Association, and I appear here on behalf of the association. This association is an unincorporated association of the chief executive officers of the 22 standard national and international railway labor organizations, representing virtually all railroad employees in this country, pursuant to the provisions of under the Railway Labor Act.

The bill, H.R. 3157, which passed the House on June 7, 1965, would amend section 2(e) of the Railroad Retirement Act of 1937 to permit the spouse of a railroad employee to receive a spouse's annuity under that section without reduction by the amount of certain benefits under the Social Security Act and certain annuities the Railroad Retirement Act.

In my testimony on this same bill before the Subcommittee on Commerce and Finance of the House Committee on Interstate and Foreign Commerce, on April 29, last, I stated, what is generally known, that the Railroad Retirement Act provides retirement benefits for railroad employees on the basis of age, total and permanent disability, and occupational disability; and benefits to spouses of railroad employees.

The act also provides benefits to surviving widows, minor children, and parents of railroad employees. All these benefits are financed by payroll taxes at the present tax rate of 8% percent each on employees and employers on compensation up to $450 a month.

As you know, there is now a deficit in the financing of the benefits in the Railrod Retirement Act of $19.5 million a year on a level basis. This amounts to 0.44 percent of taxable payroll.

The report of the Railroad Retirement Board on this bill shows that the additional costs of the amendment proposed by the bill would come to approximately $14 million a year, on a level basis, or 0.32 percent of taxable payroll. Enactment of the bill would threefore increase the present actuarial deficiency to approximately 0.76 percent of taxable payroll, or $33.5 million a year.

We are, of course, vitally concerned with the administration of the Railroad Retirement Act. We have a standing railroad retirement committee which constantly evaluates the adequacy of the benefits provided by the act as well as the adequacy of the financing of such benefits. It has always been our policy to make certain that all the benefits under the system are adequately financed.

It is a matter of record that the provision for spouses' annuities was enacted for the first time by the 1951 amendments to the Railroad Retirement Act. This provision was in substitution for an increase in employee annuities in cases where two persons had to live largely on the income from only one annuity under the act.

In view of the purpose of this provision, the 1951 amendments provided that where a spouse has an income from a railroad retirement annuity or a social security benefit, the spouse's annuity would not be paid except to the extent by which it exceeds such annuity or benefit. The bill, H.R. 3157, however, would delete this limitation on the spouse's annuity, and would thus pay both the spouse's annuity and the railroad retirement annuity, or the spouse's annuity and the social security benefit.

The 1951 amendments to the Railroad Retirement Act established the policy against dual benefits by providing three restrictions. The first required that an employee's annuity be reduced by the amount of his social security benefit, or by the amount of that portion of his annuity which is based on the untaxed service before 1937, whichever was less.

The second required that a railroad employee's widow's annuity be reduced by the amount of her social security benefit; and the third required that a spouse's annuity be reduced by the amount of any social security benefit for which such spouse is eligible, except a wife's or husband's benefit.

The reduction is limited to the amount by which the wife's or husband's benefit is exceeded by any other social security benefit for which the spouse is eligible, and by the amount of any annuity under the Railroad Retirement Act for which such spouse is eligible.

The Congress, however, eliminated the first of these restrictions in 1954, and eliminated the second in 1955. Since then many Members of both Houses of Congress have sought to do what appeared to them logical; namely, to eliminate also the last of these three restrictions. The adoption of this bill by the House by a vote of 323 to 0 is ample evidence of this.

While we are deeply concerned with the proposed increase in the financial deficit in the amount of $14 million a year, we are obliged to concede that logic is in favor of the bill. After eliminating the first two restrictions, the Congress set the pattern for eliminating the third. In view of this, and the fact that the bill was passed by the House without a single dissent, we interpose no objection to the adoption of the bill.

We deem it appropriate to emphasize in conclusion, Mr. Chairman, that we advocated the 1951 restrictions against dual benefits, and we opposed the initial inroads on removing the restrictions. Our opposition was in conformity with our policy to minimize deficits in the financing of the railroad retirement system. The progressive relaxation of these restrictions, and the consequent increases in benefit costs, have been the choice of Congress. If it is now the choice of Congress to take another step in that direction, we interpose no objection.

That concludes my prepared statement. Mr. Chairman, you will recall that in my testimony last year on H.R. 12362, I presented substantially the same position as I have here today. There have been some significant changes since then.

You may recall that at the conclusion of my testimony last year, on questioning, I said that we would, with reluctance, be favorably inclined toward passage of the bill. I believe it was Senator Jordan who inquired what our position would be if there were an accompanying measure to finance the cost of the benefits. My response at that time was that there was no such measure before us, and I therefore could not anticipate what our position might be.

Now, in view of these changes that have taken place since, and particularly your amendment offered this morning, I am authorized to state that we will actively support the amendment and the bill as so amended.

Senator PELL. Thank you very much.

As you gathered, we are trying to make the system as actuarily sound as we can. Actually, too, I think I can be criticized that we have not introduced an amendment that would bring it completely in balance, which would raise the base even further.

However, it would seem that this is the best approach to keep it in line with the social security system and have the two systems operating as nearly evenly as possible, both from the viewpoint of simplicity of operation and the viewpoint of the beneficiaries and those of labor and management that may be interested.

I want the record to show if we operate at a deficit continuously, eventually we are in considerably more difficulty than we face today. But our hope is that the system will come into balance as time goes on. Do you think it will or not?

Mr. BEATTIE. Well, I would say that it will. Historically I should say we have watched the system very closely and whenever measures were needed to correct what amounted to a deficit that was growing to large, measures were taken to do so.

There has been no period of time when it has gotten so out of line for such a length of time that it was a threat. And I think that his consideration toward our system will be extended in the future by both labor and management, with the assistance of Congress, of

course.

Senator PELL. As you may know, I am quite enthused about railroads and railroading. My hope is it will provide increasing service to the community and in that case there will be more people employed paying in than are receiving benefits.

On the other hand, if the present trend continues-declining-it will be hard to reverse this trend.

Mr. BEATTIE. I am sure that we will not soon reverse the trend of declining employment in our industry. But again, measures can and will be taken to insure that our system is actuarily sound.

The situation as it now stands, with the figure I believe you mentioned, indicates to me that we are with this amendment in the area of actuarial soundness. I believe this represents somewhere in the neighborhood of one-half a percent.

Senator PELL. Thank you very much.

Senator FANNIN. Mr. Chairman, I, too, have been concerned about projecting into the future just what will happen with the decreasing number of employees.

We do have the problem of the highways being overcrowded, and a trend back to the rail transportation; so perhaps what you have explained can help the railroad industry recover with more employees, although perhaps, fewer employees on any one train or taking part in any one program.

Mr. BEATTIE. I expect that we will one day reach the bottom of our decline and we will stabilize it at some figure which is lower than it is at the present time. We may be fortunate enough to find a resurgence of business for the railroads that will call for employment of people who otherwise might be displaced by the technological changes that have taken place thus far and are taking place today.

But the decline I think will go forward for some time, and then I hope that it will stabilize at a lower figure.

Senator FANNIN. For instance, pipelines have been quite a factor, have they not? The transportation of oil, that has been quite a factor?

Mr. BEATTIE. I do not think it has been a really substantial factor compared with many other factors, but it certainly has been

one.

Senator FANNIN. You have had the trend back to the piggyback and other services.

Mr. BEATTIE. The piggyback service, which is fairly recent in the railroad industry, has a tremendous potential and is growing by leaps and bounds every year, and this is one new method by which we are bringing traffic back to the railroads that we had lost to the truckers.

Senator FANNIN. Thank you very much, Mr. Beattie.

Mr. BEATTIE. Mr. Chairman and Senator Fannin, thank you very much.

Senator PELL. Our next witness is Mr. Howard Habermeyer, chairman of the United States of America Railroad Retirement Board, Chicago, Ill.