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The bill would amend the Railroad Retirement Act of 1937, as amended, by repealing the present restriction in section 2 (e) of the act which requires the reduction of the spouse's annuity by the amount of her insurance benefit under the Social Security Act. This repeal would be retroactive to October 31, 1951, and requires the restoration of all such reductions made after that date.

The bill also purports to repeal the second sentence of section 5 (g) (2) of the act which required the reduction of survivor annuities by the amount of the insurance benefits under the Social Security Act. This sentence, however, has already been repealed by Congress, by section 2, Public Law No. 383, 84th Congress, 1st session, approved August 12, 1955. In view of this repeal this report will not otherwise consider or discuss that section of the bill.

The combined employer-employee taxes for the support of the railroad retirement system amount to 12.50 percent of taxable pay roll, with a limit of $350 a month per employee. A recent actuarial estimate shows that the level cost of the benefits under the act is about 15.70 percent of payroll, indicating a present deficiency of about 3.20 percent of payroll or $170 million a year.

We estimate that the additional costs of the amendments proposed in H. R. 1008 would come to approximately 0.19 percent of payroll or $10 million a year on a level basis. This would increase the deficiency from 3.20 to 3.39 percent of payroll or from $170 million to $180 million a year. · Although there are many other reasons why the Board believes that this bill should not be enacted, the fact that it would provide no additional revenue to meet the substantial increase in the costs of compels the Board, for that reason alone, to recommend that no favorable consideration be given to the 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, Chairnian, Committee on Interstate and Foreign Commerce,

House Office Building, Washington, D.C. DEAR MR. HARRIS: This is a report on the bill H. R. 2033 introduced in the House of Representatives on January 5, 1957, by Mrs. St. George, the identical bill H. R. 2166 introduced in the House on January 7, 1957, by Mr. Powell, and the identical bill H. R. 3115, introduced in the House on January 16, 1957, by Mr. Van Zandt.

The bills contain a number of technical defects which would require correction. For purposes of this report, we are interpreting the bills as amending the Railroad Retirement Act of 1937, as amended, in the following manner :

1. Full annuities would be payable at age 60 or after 30 years ofservice regardless of age. Under present law, full age annuities to men are not available until age 65. Women with 30 years of service may retire at age 60 without a reduction in their annuities. However, men with 30 years of service, retiring for reasons other than disability between the ages of 60 and 65, have their annuities reduced by one one-hundred-and-eightieth for each calendar month they are under the age of 65 when their annuity begins to accrue.

2. A new minimum would apply in cases of persons retiring at age 60 or after 30 years of service. This minimum would equal one-half of the creditable monthly compensation for 5 consecutive years of highest earnings. The new minimum would apply in addition to the present minimums provided in section 3 (e) of the act.

3. The provisions of the present act, which are applicable to spouses' and survivors' annuities, would remain unchanged. In particular, the age re quirement for spouses' annuities would still remain 65, even though the normal retirement age for employees would be lowered to 60.

4. The changes would become effective the first of the month following the month in which 90 days would have elapsed since the enactment of the bills.

The amendments would be objectionable on the following grounds :

: 1. The bills, if enacted, would increase the cost of the railroad retirement system by about 3.75 percent of payroll, or $200 million a year.

2. 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.

3. The effect of the enactment of the bills would be to increase the deficiency to about 6.95 percent of payroll or approximately $370 million a year.

Although there are other important reasons why the Board believes that these bills should not be enacted, the fact that they would provide no additional revenue to meet the very large increase in the cost of the benefits compels the Board, for that reason alone, to recommend that no favorable consideration be given to the 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.

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 H. R. 2165, which was introduced in the House of Representatives by Mr. Powell on January 7, 1957, and referred to your committee for consideration.

The bill would amend the Railroad Retirement Act of 1937, as amended, in the following respects:

1. The conditions of eligibility for nondisability annuities would be changed by substituting for the present age and service requirements, the sole requirement that the individual have completed 30 years of service.

2. An annuitant who completed 30 years of service would receive, for the months following the month of enactment, an annuity equal to 50 percent of the "taxable wages of his 5 years of highest earnings.”

The bill would also amend the Railroad Retirement Tax Act by increasing the maximum applicable to the amount of compensation taxable under the act, both to the employee and to the employer, from $350 to $400.

The provision making 30 years of service the sole requirement for a nondisability annuity would be objectionable in that in many cases taxes would have been paid for many years (that is, for years less than 30) to support the system, without corresponding credit, or even any at all, toward retirement benefits; and since it would frustrate the expectation of receiving an annuity under the Railroad Retirement Act of many employees who will not have the 30 years' required service at retirement age or what they had come to regard as retirement age. It is possible, however, that this provision, though not so stated, was intended merely as an alternative to the present age-and-service annuity requirements. Apart from this, the provision would be objectionable because it would encourage retirement of other employees at relatively young ages, or at a time possibly many years earlier than the normal and ordinary time of retirement. The result would be a loss to the railroad industry of special skills and experience without compensating factors; and it would enable those leaving the industry to compete in the nonrailroad labor market on what would be in effect a subsidy, paid for by the railroad industry and the workers in it.

Under present law, retirement for reasons other than disability is in no case permitted before attainment of age 60. Women with 30 years of service may retire at age 60 without a reduction in their annuities. However, men with 30 years of service retiring on a nondisability annuity between the ages of 60 and 65 have their annuities reduced by one one-hundred-and-eightieth for each calendar month they are under the age of 65 when their annuity begins to accrue. The provision for computing annuities on the basis of 50 percent of the individual's "taxable wages of his 5 years of highest earnings” has technical defects which would require correction and is ambiguous, especially considered in the context of other provisions of the act which the bill does not propose to amend or strike out. It is noted, in this connection, that the bill does not propose to amend the Railroad Retirement Act to increase to $400 the amount of “compensation" (a term which, unlike "wages," has a technical, defined meaning in the act) which may be credited to an individual for any month.

The Board is also opposed to the enactment of the bill for the following reasons:

1. The bill, if enacted (and assuming that the 30-year eligibility provision is merely to provide an alternative qualifying condition), would increase the cost of the railroad retirement system by about 3 percent of payroll (with the $400 limit on monthly compensation), or $170 million a year.

2. The bill makes no provision for financing the additional cost which its en. actment would entail.

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 (with the $350 limit on monthly compensation) which is equivalent to about $170 million a year on a level basis.

The board, accordingly, recommends that no favorable consideration be given to the 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 11, Ill., March 7, 1957. Hon. OREN HARRIS, Chairman, Committee on Interstate and Foreign Commerce,

Room 1334, House Office Building, Washington, 25, D. C. DEAR MR. HARRIS : This is a report on H. R. 2233 which was introduced in the House of Representatives by Mr. O'Konski on January 7, 1957, and which was referred to your committee for consideration.

The bill would amend section 3 (c) of the Railroad Retirement Act of 1937, as amended, to base the monthly compensation which determines the amount of an employee's retirement annuity (and, incidentally, that of his wife) on the 5 calendar years (consecutive or otherwise) of highest earnings during the employee's whole working lifetime up to as much as $350 a month. At present, the monthly compensation is based on total creditable earnings during the whole period of the employee's railroad service with special provisions made for the computation of earnings before 1937 according to the base period 1924–31, with a limit in this computation with respect to months before 1954 which would not include compensation in excess of $300 a month. The bill would amend also section 2 (e) of the Railroad Retirement Act to eliminate the present provision for reducing a spouse's annuity by the amount of any monthly benefit under the Social Security Act for which the spouse is eligible leaving in effect the provision for reducing the spouse's annuity by the amount of any annuity under the Railroad Retirement Act to which the spouse would otherwise be eligible. The provisions of the amendments would be effective with respect to annuities accruing for months after the month in which the bill is enacted and would provide for the recertifications necessary by the enactment without application therefor.

Apart from any other consideration, the amendment to section 3 (c) of the Railroad Retirement Act 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 make adjustments for the increased limit on creditable compensation. In a large number of cases old payroll records may no longer be available. The possible unavailability of payroll records going many years back was, in fact, one of the reasons why the period 1924–1931 was selected for the determination of average earnings for service before 1937. The proposed amendment would recreate all these difficulties. Second, supplementary compensation reports would be required for the period January 1937-June 1954 in order to credit up to $50 a month of additional compensation which, in the overwhelming majority of cases, was not previously reported. Third, the Board would be required to go over the compensation records year by year so as to find the 5 years of highest earnings. Finally, the Board would have to have to recertify practically all employee annuities in force on the date of the enactment of the bill. 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.

The Board is opposed otherwise to the enactment of the bill for the following reasons:

1. The bill, if enacted, would increase the cost of the railroad retirement system by 1.83 percent of payroll, or about $97 million a year.

2. The bill makes no provision for financing the additional cost which its enactment would entail.

3. The railroad retirement system cannot absorb the added cost because a recent actuarial estimate of the railroad retirement system shows that the net level cost of benefits under the act is 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 bill would be to increase the deficiency to 5.03 percent of payroll or approximately $267 million a year.

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, Room 1334, House Office Building,

Washington, D. C. DEAR MR. HARRIS : This is a report on the bill H. R. 3116 which was introduced in the House of Representatives by Mr. Van Zandt on January 16, 1957, and referred to your committee for consideration.

The bill, which is identical to H. R. 856, 84th Congress, contains a number of technical defects which would require correction. For purposes of this report, we are interpreting the bill as amending the Railroad Retirement Act of 1937, as amended, in the following manner:

1. Full annuities would be payable at age 60 or after the completion of 35 years of service regardless of age. Under present law, full age annuities to men are not available until age 65. Women with 30 years of service may retire at age 60 without a reduction in their annuity. However, men with 30 years of service retiring for reasons other than disability between the ages of 60 and 65 have their annuities reduced by one one-hundred-eightieth for each calendar month they are under the age of 65 when their annuity begins to accrue.

2. A new minimum would apply in cases of person's age 60 or with 35 years of service. The minimum would equal one-half of the average creditable compensation during the 5 years of highest earnings. The new minimum would apply in addition to the present minima provided for in section 3 (e) of the act.

3. The age requirement for a spouse's annuity would still remain 65 even though the normal retirement age for employees would be lowered to 60, but the amounts of such annuities might be subject to an increase as a result of any of the proposed changes.

4. The changes would become effective the 1st of the month following the month of enactment of the bill.

The combined employer-employee taxes for the support of the railroad retirement system amount to 12.50 percent of taxable payroll with a limit of $350 a month per employee. A recent actuarial estimate shows that the level cost of benefits under the act is 15.70 percent of taxable payroll, indicating a present deficiency of 3.20 percent of payroll or $170 million a year.

We estimate that the additional cost of the amendments proposed in H. R. 3116 would come to about 2.5,0 percent of payroll or approximately $130 million a year on a level basis. This would increase the deficiency from 3.20 to 5.70 percent of payroll or from $170 million to $300 million a year.

Although there are other important reasons why the Board believes that this bill should not be enacted, the fact that it would provide no additional revenue to meet the very large increase in the cost of benefits, compels the Board, for that reason alone, to recommend that no favorable consideration be given to the 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 11, Ill., March 17, 1957. : Hon. OREN HARRIS, Chairman, Committee on Interstate and Foreign Commerce,

Room 1334, House Office Building, Washington, D. C. DEAR MR. HARRIS : This is a report on the bills H. R. 3117 and H. R. 3420, which are identical and were introduced in the House of Representatives by Mr. Van Zandt on January 16 and January 22, 1957, respectively.

The bills would amend section 2 (e) of the Railroad Retirement Act of 1937, as amended, to eliminate the present provision in the Railroad Retirement Act under which a spouse's annuity is reduced by the amount of any other annuity under the Railroad Retirement Act, or the monthly benefit under the Social Security Act (other than a wife's or husband's benefit), to which the spouse is entitled. The provisions of the amendments would be effective with respect to spouses' annuities beginning to accrue on and after the date of enactment of the bills.

The Board is opposed 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 0.18 percent of payroll, or about $10 million a year.

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

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 3.38 percent of payroll or $180 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.

RAILROAD RETIREMENT BOARD,

Chicago, Ill., March 9, 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 bills H. R. 3118, H. R. 3421, H. R. 3756, and H. R. 4523 which are identical bills and which were referred to your

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