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Section 2 (a) of such Act is amended by striking out ", and (iii) for each day of sickness in a maternity period” in the first sentence thereof, and by striking out the fourth, fifth, and sixth sentences thereof.

Section 2 (c) of such Act is amended by deleting both before the proviso and following the proviso, the identical phrases “, other than days of sickness in a maternity period,” and by deleting “; and the total amount of benefits which may be paid to an employee for days of sickness in a maternity period shall in no case exceed the employee's compensation in the base year on the basis of which the employee was determined to be qualified for benefits in such maternity period."

Section (12 (i) of such Act is amended by deleting from the seventh sentence thereof “and, in the case of maternity sickness, the expected date of birth and the actual date of birth of the child.”.

Section 12 (n) of such Act is amended by deleting “or maternity” in each place such words occur and by deleting from the fourth sentence “or as to the expected date of birth of a female employee's child, or the birth of such child.”.

PAYMENT OF CONTRIBUTIONS

SEC. 8. Section 8 (g) of the Railroad Unemployment Insurance Act is amended by inserting the following before the period at the end of the first sentence thereof: Provided, That in any event such regulations shall permit any employer at his option to pay before the end of the quarter ending September 30 of any year contributions with respect to the first month, the first and second month or the first and second and any part of the third month of such quarter."

EFFECTIVE DATE

· Sec. 9. The amendments made by this Act shall become effective with respect to all benefits paid in benefit years beginning after June 30, 1957, except that (a) maternity benefits in a maternity period established before and extending beyond such date shall be paid pursuant to the law as in effect prior to the amendments made by this Act and (b) the calendar year 1956 shall be the base year for a benefit year beginning July 1, 1957, in the case of any individual who would otherwise not be a qualified employee with respect to such year. The effective date of other provisions except as otherwise specifically provided shall be the date of enactment of this Act.

Mr. Mack. The 44 bills pending before this committee today may be grouped into a few principal categories.

Fifteen bills are identical to 8. R. 4353, which was introduced by our distinguished chairman, Mr. Harris. These bills provide generally for a 10 percent increase in annuities and pensions; permit a female employee and a spouse to retire at age 62 on a reduced annuity; charge the work clause on disability annuitants; increase the maximum creditable and taxable compensation from $350 to $400 per month; increase the tax rate from 61/4 to 71/2 percent; and make certain improvements with respect to unemployment insurance.

Another 11 bills provide for retirement at age 60 and/or after 30 years of service, or after 35 years of service, regardless of age, with an annuity of not less than half of the employee's average monthly compensation during his 5 years of highest earnings. Three bills call for the repeal of the “last employer” clause. Two bills provide for the repeal of the restriction on the right of spouses and widows to receive dual benefits.

Several bills provide for a flat percentage increase, ranging from 10 to 25 percent, in all annuities and there are other individual bills.

As I have stated, this morning we are going to hear only from Members of Congress, who have introduced these bills.

Beginning next Thursday, March 14, these hearings will be continued before the entire committee, at which time we shall hear from all other interested parties who desire to be heard on this legislation.

I should like to have inserted into the record at this point the reports on these bills from the executive departments and agencies. (The reports referred to are as follows:)

RAILROAD RETIREMENT BOARD,

Chicago, Ill., March 8, 1957. Hon. OREN HARRIS, Chairman, Committee on Interstate and Foreign Commerce,

House Office Building, Washington, D.O. DEAR MR. HARRIS: This is in reply to your requests for reports on the bill H. R. 583, introduced in the House of Representatives on January 3, 1957, by Mr. Celler; the bill H. R. 850, introduced in the House on January 3, 1957, by Mr. O'Brien; and the bill H. R. 2164, introduced in the House on January 7, 1957, by Mr. Powell.

All three bills are identical with the bill H. R. 9065, 84th Congress, 2d session, except that H. R. 850 and H. R. 2164 refer to section 3 (c) of the Railroad Retirement Act instead of to section 3 (e), as was obviously intended, and except that H. R, 583 refers to the calendar months June 1957 and July 1957 instead of June 1956 and July 1956.

The bill H. R, 9065 was considered by your committee and as S. 3616 passed, in modified form, by both Houses of Congress during the last session, and enacted into law as Public Law 1013, 84th Congress, approved August 7, 1956.

Since, as indicated, the bills woud amend the Railroad Retirement Act (and its companion tax act, the Railroad Retirement Tax Act) with respect to a form of legislation in effect before the enatcment of Public Law 1013, 84th Congress, the Board woudl not, apart from other considerations as to which one or more members of the Board may have differing views, recommend the enactment of any of the bills in their present form.

The Bureau of the Budget has commented as follows with respect to this report:

“You are advised that there is no objection to the submission of your report to the committee and that the provisions which would exempt employee contributions from the income tax and from withholding provisions of present law is not in accord with the program of the President because (1) the exemptions are discriminatory in that they woudld provide special treatment favoring a select group of employees, and (2) they would lead to proposals for comparable treatment for other employees with serious adverse effects upon income tax revenues. Sincerely yours,

HOWARD W. HABERMEYER, Chairman.

EXECUTIVE OFFICE OF THE PRESIDENT,

BUREAU OF THE BUDGET,

Washington, D. C., March 7, 1957. Hon. OREN HARRIS, Chairman, Committee on Interstate and Foreign Commerce,

House of Representatives, Washington, D. C. MY DEAR MR. CHAIRMAN: This is in reply to your requests for the views of the Bureau of the Budget on H. R. 583, H. R. 850, and H. R. 2164, identical bills to amend the Railroad Retirement Act.

These bills provide about 5 percent increases in benefits paid under the Railroad Retirement Act. (Technically the bills provide for a 15 percent increase, but they start with the benefit levels existing before the increases resulting from the enactment of Public Law 1013, 84th Cong.) The bills also increase the contribution rate paid by employers and employees from 6.25 percent to 7.25 percent and exempt the employee's contribution from both withholding tax and taxable income.

These exemptions are discriminatory as they would provide special treatment favoring a select group of employees. As pointed out by the President when he signed S. 3616 last year, such exemptions “would amount to an indirect assessment of the rest of the community for improvements in the retirement system for a single industry.” Furthermore, these exemptions would lead to proposals for comparable treatment for other employees with serious adverse effects upon income-tax revenues.

Accordingly, you are advised that the enactment of any of these bills would not be in accord with the program of the President. Sincerely yours,

A. R. JONES, Deputy Director.

RAILROAD RETIREMENT BOARD,

Chicago, Ill., March 7, 1957. Hon. OREN HARRIS, Chairman, Committee on Interstate and Foreign Commerce,

House Office Building, Washington, D. C. DEAR MR. HARRIS : This is a report on identical bills H. R. 880, H. R. 3974, H. R. 4312, and H. R. 3755, which were introduced in the House of Representatives and referred to your committee for consideration. The bill H. R. 880 was introduced in the House by Mr. Poff on January 3, 1957, H. R. 3974 was introduced in the House on January 29, 1957, by Mr. Dorn, H. R. 4312 was introduced in the House by Mr. Vursell on February 4, 1957, and H. R. 3755 was introduced in the House by Mr. Cunningham on January 28, 1957.

The bills 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. In determining the average monthly compensation for service before 1937, the present computation based on the 1924–31 period would be replaced by a computation based on 5 calendar years (consecutive or otherwise) of highest earnings before 1937. We assume that this is the change intended by section 3 of the bills, the wording of which is not clear.

3. The limit on creditable monthly compensation would be raised retroactively to $350. Under present law, the limit is $300 a month per employee on all service before July 1954 with a limit of $350 a month thereafter.

4. The provision in the present law that service after age 65 shall not be used in the computation of the montly average compensation if it results in a lower annuity, would be eliminated.

The Board would be required to recertify all annuities and pensions which could be affected by any of the changes specified in the bills. The effective dates of the changes proposed are not expressly stated.

Aside from any other consideration the amendments proposed in the bills 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, new compensation reports would be required for the period January 1937 to June 1954 in order to credit up to $50 a month of additional earnings which, in the overwhelming majority of cases were not previously reported. Third, 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 not only upon the Board but also upon employers who would be required to search their payroll records for many years back and to submit new reports based on the additional information developed. 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 bills for the following reasons:

1. The bills, if enacted, would increase the cost of the railroad retirement system by about 2.25 percent of payroll, or $120 million a year.

2. The bills make no provision for financing the additional cost which their enactment would entail.

90453—57-43

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 15.70 percent of taxable payroll. Since the actual tax rate is only 12.50 percent, the present benefit structure already involves an actuarial deficiency of 3.20 percent of payroll which is equivalent to about $170 million a year on a level basis.

4. The effect of the enactment of the bills would be to increase the deficiency to about 5.45 percent of payroll or $290 million a year.

The Board, accordingly, recommends that no favorable consideration be given to these bills.

The Bureau of the Budget has advised that there is no objection to the submission of this report to the committee. Sincerely yours,

HOWARD W. HABERMEYER, Chairman.

EXECUTIVE OFFICE OF THE PRESIDENT,

BUREAU OF THE BUDGET,

Washington, D. C., March 7, 1957. Hon. OREN HARRIS, Chairman, Committee on Interstate and Foreign Commerce,

House of Representatives, Washington, D. C. MY DEAR MR. CHAIRMAN: This is in reply to your requests for the views of the Bureau of the Budget on the following bills to amend the Railroad Retirement Act: H. R. 880, 1008, 2033, 2165, 2166, 2233, 3115, 3116, 3117, 3118, 3420, 3421, 3422, 3545, 3755, 3756, 3974, 4312, 4523, 4676.

While many of the bills contain specific undesirable features, there is one basic deficiency common to all these bills. Each bill would increase benefit payments without providing increased contributions.

At present the net level cost of benefits under the Railroad Retirement Act is estimated by the actuaries of the Railroad Retirement Board as 15.70 percent of taxable payroll. The actual tax rate is currently 12.50 percent. Thus, the Board estimates that the present benefit structure contains an actuarial deficiency of 3.20 percent of payroll, or about $170 million a year.

These bills would increase the existing deficiency still further-ranging, as reported by the Railroad Retirement Board, from 0.18 percent of payroll (or $10 million a year) to 3.75 percent of payroll (or $200 million a year).

Both the Congress and the executive branch, as well as the railroad operators and the employee organizations, have agreed that the railroad retirement system should be fully financed-out of employer and employee payroll contributionsto maintain the system on a sound basis.

Accordingly, in view of the further financial deficiency resulting from these bills, you are advised that the enactment of any of these bills would not be in accord with the program of the President. Sincerely yours,

A. R. JONES, Deputy Director.

EXECUTIVE OFFICE OF THE PRESIDENT,

BUREAU OF THE BUDGET,

Washington, D. C., March 16, 1957. Hon. OREN HARRIS, Chairman, Committee on Interstate and Foreign Commerce,

House of Representatives, Washington, D. C. MY DEAR MR. CHAIRMAN: This is in reply to your letter of January 17, 1957, requesting the views of the Bureau of the Budget on H. R. 900, a bill to amend the Railroad Retirement Act of 1937 to provide that certain employees who terminate their railroad employment shall be entitled to a refund of the railroad retirement taxes which they have paid.

H. R. 900 would amend the Railroad Retirement Act to permit an employee with less than 10 years of railroad service to withdraw, in a lump sum with interest, the taxes paid by him under the Railroad Retirement Act. The bill also provides that the railroad employment would not thereafter count towards benefits under either the Railroad Retirement Act or the Social Security Act.

Aside from the increased administrative burden, which would be required in many cases for small refunds, the proposal would jeopardize the social-insurance protection now provided to an employee and his family. Under the provisions of the bill the period for which a refund was paid could not be included with other (or subsequent) employment to provide benefits under the OASI or the railroad programs.

Accordingly the Bureau of the Budget does not recommend enactment of the proposed bill. Sincerely yours,

ROBERT E. MERRIAM, Assistant Director.

RAILROAD RETIREMENT BOARD,

Chicago, Ill., March 8, 1957. 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. 900, which was introduced in the House of Representatives by Mr. Rabaut on January 3, 1957, and referred to your committee for consideration.

The bill would amend the Railroad Retirement Act of 1937, as amended, by providing that an employee with less than 10 years of service who terminates his railroad employment 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 towards 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 before the completion of 10 years of service 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 he 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.

The Bureau of the Budget has advised that there is no objection to the submission of this report to the committee. Sincerely yours,

HOWARD W. HABERMEYER, Chairman.

RAILROAD RETIREMENT BOARD,

Chicago, Ill., March 7, 1957. 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 House of Representatives 1008, which was introduced in the House of Representatives by Mr. Williams on January 3, 1957, and which was referred to your committee for consideration.

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