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Moreover, it will make women railroad workers and the wives of retired workers entitled to the same option to apply for reduced benefits at age 62 as such women now have under social security. I would like to see the eligibility age lowered to age 60, instead of only to age 62.
We know that the steady increases in the cost of living which have occurred in the last 6 months cause perhaps the greatest hardship to men and women who are living on retirement incomes. We know, too, that these people usually have greater need for medical care, because of advancing years, and that medical costs have been increasing at a more rapid rate than almost any other item in the family budget.
The Harris bill also revises the “all or nothing” income limitation for disability annuitants so that they can earn $1,200 a year before any benefit loss would be incurred. Present law cancels benefits for any month in which they earn $100 or more.
To maintain the railroad retirement system's trust fund, the bill also provides an increase in the tax rate of 114 percent and in the tax base of $50 per month. This will insure that the new benefits provided are soundly financed and that some of the deficiencies in the retirement fund in recent years will be eliminated.
Finally, I am strongly in favor of this proposal because it makes substantial improvements in the unemployment insurance system of the railroad industry, thus protecting the rights of younger workers who are unemployed, or unable to work because of a serious illness or injury.
Present rates, which are based on a benefit schedule of from $3.50 to $8.50 a day, would be increased to provide a l'ange of from $4.50 to $10.20 a day. The bill would also increase the minimum rate guarantee from 50 to 60 percent of the worker's daily compensation on his last job in a “base year".
Mr. Chairman, I am glad to support this legislation both because I believe it is long overdue and because I am convinced that it will make some very important improvements in the railroad retirement and unemployment insurance systems.
We deferred action on many of these proposals, in enacting the 1956 amendments, on the ground that they required further consideration. They have received that consideration. We owe it to the railroad people, I am sure, to act now with promptness and dispatch so that they can become entitled to the higher benefits they now need so desperately.
Thank you, Mr. Chairman.
The CHAIRMAN. The Honorable Howard W. Habermeyer, Chairman of the Railroad Retirement Board is here with us this morning, and the Honorable Horace W. Harper, and the Honorable Thomas M. Healy, and members of the Board's staff are also present.
We are very glad to welcome the members of the Board and their staff here this morning on this program. : Do I understand Mr. Habermeyer that you will speak for the Board ?
STATEMENT OF HON. HOWARD W. HABERMEYER, CHAIRMAN,
RAILROAD RETIREMENT BOARD
Mr. HABERMEYER. I will speak for myself. I think the other two members have views that they would like to express themselves.
The CHAIRMAN. Very well. Mr. HABERMEYER. The Board, of course, has filed reports with respect to all of the bills you mentioned earlier, and I understand our reports will be made a part of the record of these hearings.
The CHAIRMAN. Your reports have already been incorporated in the record as a part of the hearings.
Mr. HABERMEYER. Thank you, sir.
Without taking up too much of you gentlemen's time, I would like to say first that in all
The CHAIRMAN. Pardon me; do you have a prepared statement you wish to present? Mr. HABERMEYER. No, sir.
The CHAIRMAN. It is usually customary to have prepared statements so that the members of the committee may have them as you present them.
Mr. HABERMEYER. I filed my views as a part of the report that the Board submitted.
The CHAIRMAN. Then, your statement now will be a supplement to the report that you filed at that time? Mr. HABERMEYER. Yes, sir. The CHAIRMAN. We all have copies of your report. Mr. HABERMEYER. Of the bills under consideration, the Board has unanimously opposed all of the bills on which we reported, except 4353 and 4354.
The main reasons for the Board's opposition to the other bills were that the bills themselves generally provided increases in benefits, or removal of restrictions that we now have in the Railroad Retirement Act, both of which would cost more money, and the system is in the sorry position at the present time of being underfinanced to the tune of about 3.20 percent of level payrolls.
The CHAIRMAN. In order that we may have a clear picture, Mr. Chairman, do I understand that you have a report on the bills that are pending before this committee in which the Board takes the position in opposition to all the bills with the exception of 4353 and 4354, and other bills, identical thereto? Mr. HABERMEYER. Yes, sir.
The CHAIRMAN. And all of the rest of the bills introduced by the various Members are opposed by the Board ? Mr. HABERMEYER. Yes, sir. The CHAIRMAN. Are those the unanimous reports of the Board ? Mr. HABERMEYER. That is the unanimous report on each of those bills.
The CHAIRMAN. All right. Mr. HABERMEYER. As I say, for the reason that generally speaking the bills would increase costs under the railroad retirement system and this system is underfinanced at the present time to the tune of 3.20 percent of level payroll or $170 million a year.
Last year, when the Congress
The CHAIRMAN. Now, you say that when the bills pending before the committee then could cost the fund $170 million?
Mr. HABERMEYER. No, sir; the fund is already underfinanced $170 million a year on level-cost basis, about 3.2 percent of the payroll; and the bills that we are opposed to would add to that deficiency.
The CHAIRMAN. How much? Mr. HABERMEYER. They vary. For example, H. R. 8080 would add to the deficit 2.25 percent of level payroll or $120-million a year, making a deficit then of 5.45 percent or $290 million a year.
H. R. 1008 would increase the deficit 0.19 or $10 million a year, making a total deficit of 3.39;$180 million a year total.
The CHAIRMAN. We have that before us. That information is in the record. So you need not take the time to read it.
Mr. HABERMEYER. Last year when the Congress approved the 10 percent
The CHAIRMAN. Since you are not reading a prepared statement, in order that we may keep all that information up to date, I am going to interrupt you just a moment. Mr. HABERMEYER. Yes, sir.
The CHAIRMAN. Is it true that practically all of the other bills propose increased benefits without providing any way to take care of the cost? Mr. HABERMEYER. Yes, sir. The CHAIRMAN. You have had an an opportunity to go over them? Mr. HABERMEYER. Yes, sir.
The CHAIRMAN. And there are some 40 bills pending which propose various increases in benefits. can you say for the record whether or not any of the pending bills provide for any methods whatsoever to pay for the increased benefits proposed and to catch up with the deficit now existing?
Mr. HABERMEYER. They do not provide for additonal financing or the elimination of the present deficit; that is right, sir.
Last year, when the Congress approved the 10 percent increase that was granted, the President of the United States in signing the bill called attention to the fact that this was putting the railroad retirement fund in a precarious position and requested that the Congress at its earliest opportunity this year, do something to remedy that situation.
I think that the first order of business is to take care of the present deficit that exists in the railroad retirement system.
Now, with respect to H. R. 4353 and H, R. 4354 and identical bills, the financing necessary to eliminate the deficit that we presently have in this system would be taken care of, as well as the additional financing to cover the liberalizations provided by the bills.
Mr. O'HARA. Mr. Chairman, will the gentleman permit me to ask a question to clarify one thing?
The CHAIRMAN. Mr. O'Hara. Mr. O'HARA. Does the gentleman mean that H. R. 4353 and similar bills would take up this $170 million yearly deficit that exists?
Mr. HABERMEYER. Yes, sir. And in addition provide the funds necessary to pay for the liberalization included in those bills.
The actuary of the Board reports that if 4353 and 4354, identical bills, were enacted
Mr. HALE. Mr. Habermeyer.
Mr. HALE. Did I understand you to say that 4354 and 4353 are the bills in which you are primarily interested?
Mr. HABERMEYER. They are the bills which the Board has not unanimously opposed; yes, sir.
Mr. HALE. You mean that the Board is unanimously opposed to all of the other bills? Mr. HABERMEYER. Yes. Mr. HALE. That simplifies our situation. Mr. HABERMEYER. Yes, sir.
The CHAIRMAN. Well, to put it another way, has the Board unanimously approved this bill? Mr. HABERMEYER. No, sir.
The other two members will speak for themselves on H. R. 4353 and H. 8.4354 and I am here presenting my views.
Mr. HALE. The Board is not distinguished for unanimity on any point? * Mr. HABERMEYER. Yes, sir. Yes, we are unanimously opposed to the other bills.
The CHAIRMAN. Now, let us have your views on this bill. Mr. HABERMEYER. Yes, sir. As I was saying, it does provide the financing to remove the deficit we now have and also to cover the additional costs provided by the legislation included in the bill.
The fund, if the bills are enacted, according to our Board's actuary, would have a deficit of 0.37 percent or $21 million a year, but that, he informs me, is so small that from a practical standpoint we could regard the fund as being financially sound.
With respect to my views on H. R. 4353 and H. R. 4354, there are two factors, of course, that I am sure you will weigh very carefully.
One is the needs of the beneficiaries for these increases as proposed and
Second, is the ability of the industry to carry the additional financing
I am really not an expert in either field. I am sure that the management and labor groups will make their cases much better than I could.
And, I would only want to urge at this time that whatever this committee does in the way of changing the railroad retirement system, I should hope that the final result would leave us with a system that is financially sound; that it would provide the wherewithal, the finances, to take care of the benefits we are expected to pay.
I think that is necessary and especially in the interest of the younger employees in the railroad industry who at some time will hope to qualify and draw benefits from this system that they are supporting.
Thank you, very much.
The CHAIRMAN. Well, you still have not given us the benefit of your views, whether you think this is a sound bill or not.
Mr. HABERMEYER. I say that the bill does provide the financing, to take care of the benefits, the problems that we now have.
The CHAIRMAN. Yes.
Mr. HABERMEYER. With respect to the liberalization of benefits, and whether or not the industry can carry additional costs, I do not .believe I am in a very good position to advise the committee, and I think others who will follow can develop those facts much better and much more thoroughly than I could.
The CHAIRMAN. I think, in view of the position you just stated, we had better hear from the other two members and see what they have to say.
Mr. O'HARA. May I ask one question?
The CHAIRMAN. Mr. O'Hara.
Mr. O'HARA. Mr. Harbermeyer, as I understand, even H. R. 4353 would still leave a deficit of approximately $21 million. Is that what you said ?
Mr. HABERMEYER. Yes, in that area, but the actuary advises me that this is so close to soundness, that it should not be a disturbing factor. Mr. O'HARA. I think that is relatively correct, Mr. Chairman. Mr. HABERMEYER. Yes. The CHAIRMAN. Thank you. We will hear Mr. Harper.
STATEMENT OF HON. HORACE W. HARPER, MEMBER, RAILROAD
As acimento, your come to try to the
Mr. HARPER. Mr. Chairman.
The CHAIRMAN. Mr. Horace W. Harper, member of the Railroad Retirement Board. Mr. HARPER. Mr. Chairman, I have a prepared statement. The CHAIRMAN. You may proceed. Mr. HARPER. This is in addition to the statement contained in the report of the Board.
The CHAIRMAN. Yes. Mr. HARPER. The Board members have agreed as to the effect and the cost of the bills 4353 and 4354 and identical bills.
The Board was not in agreement, nor could we bring ourselves into an agreement, with respect to the desirability of the bills.
However, I subscribe to this bill 100 percent, and I should like very much to have your committee report the bill out favorably and bring it to enactment if that can be done.
As Chairman Habermeyer has said, the Board, at the request of your committee, examines bills that are introduced; develops them as to their effect and as to the cost and then gives the opinion of the Board with respect to the desirability of those bills.
Our report on the bills at hand this morning differs in this respect. One member of the Board is for the bill. One member is unalterably opposed to the bill, and you have just heard the chairman explain clearly his views with respect to the bill.
The CHAIRMAN. Did you say “clearly ?" Mr. HARPER. Yes, sir. I hope that that facetious statement will not reflect any discredit on Mr. Habermeyer, but frankly I do not know whether he is for the bill or against it.
The CHAIRMAN. Well, I think it should be said in all fairness that Mr. Habermeyer is a new member of the Board, having just been appointed a few months ago and I doubt very seriously if he has had an opportunity to give the study to it that the other members of the Board have.
Mr. HARPER. I think that is quite true.
And then, Mr. Healy and I represent parties at interest here and it could be reasonably expected that we would have, shall I say, partisan views, with respect to these and other bills.
This is a bill which provides reasonable increases- not so much as we would like—but does provide reasonable benefits.
It provides a basis for liquidating the present deficit of 3.20 percent. It provides additional revenue to meet the cost of the increased benefits provided in the bill.