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4. Employees should draw unemployment benefits, from a trust fund provided solely by employers, while on strike against the industry. The payment of benefits in these cases, whether many or few, is wrong in principle. The technical analysis shows that, in fiscal 1955–56, some 18,500 persons, who voluntarily quit their jobs, or were discharged or suspended for misconduct, were paid nearly $8 million in benefits. No indication is contained in the analysis of the number drawing benfits after refusing offers of suitable work or the total amount they received.

The technical analysis reveals that 3,900 maternity beneficiaries received some $312 million-exclusive of any amounts paid because of illness unrelated to pregnancy-in the fiscal year ending June 30, 1956.

Although the analysis indicates that only 300 persons received benefits of some $63,000 while on strike in fiscal 1955–56, there were 18,100 such beneficiaries in the previous year who received in excess of $8 million. In the present fiscal year there have already been 3 work stoppages involving some 1,700 railroad employees—all eligible for benefits under present law.

The railroad retirement system, financed by employer and employee contributions, contains adequate provisions for persons who reach retirement age or become disabled. Certainly it was not the purpose in creating the railroad unemployment and sickness insurance system to use those funds, contributed solely by the carriers, to finance benefits for persons eligible for benefits under the Railroad Retirement Act. That this is being systematically done is evidenced in the technical analysis which show that over $12 million was paid out last year under the Railroad Unemployment Act to those persons who could and should have received benefits under the railroad retirement program.

H. R. 6016 would also adjust other unjust situations. Persons becoming currently unemployed or sick are being granted or denied benefits not on the basis of present employment, but on their previous base year wages. H. R. 6016 would immediately qualify every employee, with a real attachment to the industry in the 12 months preceding the filing for benefits.

The unjust results of denying benefits to persons with substantial recent railroad work is illustrated in the technical analysis which estimates that some 15,000 employees, not qualified under the present law, might have been qualified under the bill and have received about $6 million that was not paid. These were persons who, having at least 87 days' work, with some in each of 6 months of the 12 months immediately before becoming unemployed, would have established their benefit year.

The equally unjust results of existing law is emphasized in the estimate that 33,000 persons were paid between $10 million and $15 million despite the fact that so little of their recent work was in the railroad industry they failed to meet even this modest requirement of the bill. Nevertheless, they qualified under present law on the basis of earning $400 or more in the calendar year 1954. Doubtless many of these persons actually entered other work covered by State unemployment systems in 1954 but, despite this, claimed railroad benefits on becoming unemployed in the last fiscal year.

The proposed change in benefit rates to 60 percent of the individual's actual pay loss is further evidence of the industry's desire to remove the inequities in the present law. The present half-pay formula gives a benefit equal to substantially higher percent of actual pay loss to a person without dependents than it does to a person with dependents—which is incompatible both with equity and the purposes of the system. The bill gives both the same percentage of actual pay loss—the family man a higher percentage of gross pay before withholding. It seems clear that the man with a family, having dependents, has greater obligations than the single indvidual, and for that reason should have larger net unemployment and sickness benefits. Although no comparative "cost" figures are presently available, there is some thought that no material change in the total average benefits will result.

This bill also would permit the railroads, individually or collectively, to remit before the 30th of September each year, their unemployment contributions on wages actually paid prior thereto, which is in line with sound business policy.

Summarizing, the enactment of this bill will correct inequities in the present law; deprive no one of just benefits; restore security and stability to a system created for the protection of true railroad workers; and, through all of these things, promote the public welfare. H. R. 6016 should be enacted.

A report on an identical bill, S. 1630 has been cleared with the Bureau of the Budget which advised that it had no objection to the submission of the report. By direction of the Board:

MARY B. LINKINS, Secretary of the Board.

RAILROAD RETIREMENT BOARD,

Chicago, Ill., April 1, 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. 6029 which was introduced in the House of Representatives on March 14, 1957, by Mr. Poff, and which was referred to your committee for consideration.

This bill is identical with the bill H. R. 1008 which was introduced in the House on January 3, 1957, by Mr. Williams.

Accordingly, we respectfully request that you consider our report on the bill H. R. 1008 as the report also on the bill H. R. 6029. Sincerely yours,

HOWARD W. HABERMEYER, Chairman. Mr. MacK. And now, we shall proceed to hear from our colleagues who will explain their bills and give such information as they desire.

Our first witness will be our colleague from Pennsylvania, Hon. James E. Van Zandt.

STATEMENT OF HON. JAMES E. VAN ZANDT, A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF PENNSYLVANIA Mr. VAN ZANDT. Mr. Chairman, I am grateful to you and to the member of this committee for the opportunity to appear before you and urge approval of the bills I have introduced at the request of thousands of active and retired railroad employees whom I have the honor to represent.

These bills—with the exception of one bill, H. R. 4530—have been introduced by me in previous Congresses and they have the support of many individuals and groups among the railroad population of my district and the Nation.

The bills are as follows:

H. R. 3115, introduced on January 16, provides retirement on full annuity at age 60, or after serving 30 years, and further provides that such annuity for any month shall be not less than one-half of the individual's average monthly compensation for the 5 years of highest earnings, and so forth.

H. R. 3116, introduced on January 16, provides full annuities at compensation of half salary or wages based on the 5 highest years of earnings, for individuals who have completed 35 years of service, or have attained age 60.

H. R. 3117 and H. R. 3421, are identical and provide that an annuitant may be eligible for his retirement annuity even though he renders compensated service for an employer other than railroads by whom he was last employed before his annuity became effective.

These bills cover the situation where a retired employee is denied. the opportunity to serve as a clerical employee of a church, civic, fraternal, or social organization.

H. R. 3422 provides a 25 percent across-the-board increase in widows' annuities.

H. R. 4530 is identical with H. R. 4353 and H. R. 4354, the socalled Harris-Wolverton bills, amending the Railroad Retirement and the Railroad Unemployment Insurance Acts. This legislation liberalizes benefits under both acts and was introduced at the request of railway-labor organizations in my congressional district who subscribe to the views of the Railway Labor Executives Association who are the sponsors of this legislation.

Inasmuch as H. R. 4530 is identical with the Harris-Wolverton bills and, having no pride of authorship, I join with the Railway Labor Executives Association in advocating favorable consideration of the Harris-Wolverton version of the legislation.

Before any further discussion of proposed amendments to the Railroad Retirement Act, I want to reaffirm the position I have taken annually before this committee to the effect that there is an absolute necessity of maintaining the stability of the retirement fund and keeping it in a solvent condition to guarantee the payments of present and future benefits with the highest degree of certainty.

In this connection, it should be recalled that when President Eisenhower-on August 7, 1956—signed Senate bill 3616, known as the 1956 amendments to the Railroad Retirement Act, he issued a statement calling attention to the fact that the cost of the 1956 amendments estimated to be $83 million annually would increase the deficiency of the retirement fund to $169 million a year.

President Eisenhower further stated that corrective action was imperative in remedying the $169 million deficiency and that he was signing Senate bill 3616 with the understanding that the 85th Congress would take corrective action.

At this point I would like to make a part of the record the statement of President Eisenhower.

(The statement referred to is as follows:)

THE WHITE HOUSE

STATEMENT BY THE PRESIDENT I have today signed s. 3616, to amend the Railroad Retirement Act of 1937 to provide increases in benefits, and for other purposes.

The bill provides generaly for a 10-percent increase in existing benefits under the Railroad Retirement Act. The principal exceptions are those widows, spouses, and survivors who are now receiving benefits under the social security minimum guaranty provisions.

I take this action for two reasons: First, it will help thousands of retired railroad employees and their wives to meet their day-to-day living expenses. Secondly, the Senate Labor and Public Welfare Committee has indicated its unanimous determination to act promptly in the next session of the Congress on a measure which will finance the cost of these benefit increases. Representatives of railroad labor organizations also have given firm assurances that they will propose at the opening of the next Congress a program to assure adequate financing of the railroad retirement system. It is imperative that satisfactory legislation for this purpose be proposed and enacted.

Failure to take this action would mean that the time will come when the existing reserve fund of the railroad retirement system will be exhausted. Then the program would be left without sufficient income to meet its benefit obligations to the thousands of hardworking railroad employees who are now contributing to the fund. It has been proposed that the burden of higher employee payroll taxes might be offset through a special exemption which would exclude employee contributions from income tax and from tax withholding provisions of present law. Neither such a device nor other Federal contribution, whether directly of indirectly made, would be equitable. This was made clear when the administration opposed the proposal at the time of its recent consideration in

the Congress. It would amount to an indirect assessment of the rest of the community for improvements in the retirement system for a single industry.

From the establishment of the railroad retirement system in 1937, it has been clearly intended that the benefits be financed entirely by employer and employee payroll contributions. The rate payable by railroad employees is 644 percent on compensation up to $350 a month. Employers pay an equal amount. For some time it has been a matter of concern to the executive branch of the Government that the combined payroll tax rate of 1242 percent is not sufficient fully to finance the estimated future liabilities of the railroad retirement program.

The sixth acturial evaluation of the railroad retirement program, issued in May of this year, states in part as follows:

“* * * The difference betwen the 14.13 percent needed to finance the liabilities of the Railroad Retirement Act and the 12.5 percent currently collected is $86,390,000 a year, which indicates that an increase in the revenues is needed, if the system is to be maintained on a sound reserve basis. At the present time the current disbursements for benefits amount to approximately 97.5 percent of the taxes currently collected, and the time when disbursements will exceed taxes at the current rate of 12.5 percent is imminent * * *."

It is estimated that the benefit increases provided in S. 3616 will cost $83 million a year at a level premium basis, raising the deficiency to $169 million a year. At present tax rates and existing payroll levels, this obviously will aggravate the dangers referred to in the evaluation report. Corrective action is imperative. It should be taken promptly in the next session of the Congress.

Mr. VAN ZANDT. Mr. Chairman, the deficiency reported in the retirement fund is the stumbling block to our efforts to further liberalize the Railroad Retirement Act and increase its benefits.

Therefore, Congress as custodian of the railroad retirement fund, in finding means to liquidate the $169 million deficit and at the same time finance the cost of new amendments, is faced with the necessity of providing new sources of revenue, first, by either increasing payroll contributions and allowing the employee to take credit for the increase in his income-tax return, or, secondly, to subsidize the railroad retirement fund by a direct contribution from the Treasury of the United States.

Mr. Chairman, there is a definite need for a further liberalization of railroad-retirement benefits. This need is as great today as it was a year ago, if not greater, due to the fact that the cost of living is still increasing and monthly benefits have not kept pace with it.

Those of us who represent districts with a heavy railroad population, both active and retired, know whereof we speak when we say retired railroaders and their families or their survivors are finding it difficult to exist on the present scale of benefits.

Even the active railroad employees and their families are concerned about inadequate benefits because they are looking forward to retirement and to having a retirement system that will provide them with security for their retirement years.

Last year, Mr. Chairman, you will recall Congress provided an increase or less than 10 percent for certain annuitants, pensioners, and survivors.

In my opinion, this increase should have been an across-the-board increase, with no exceptions.

As it is, there were certain groups of beneficiaries, especially widows, who received no increase whatsoever. In this day and age, with the cost of living at an all-time high, it is impossible to explain to these groups why they were not included in the legislation granting increases in retirement benefits.

Should the Harris-Wolverton bill be approved the proposed 10 percent increase should apply to all annuitants, pensioners, or their survivors, without any exceptions. To do otherwise, you are simply inviting the charge of discrimination against those excluded from receiving the increase.

Speaking of discrimination, I would like to see the Harris-Wolverton bill amended by including a provision that would repeal the prohibition against the payment of dual benefits to spouses thereby making them eligible to receive spouse benefits under the Railroad Retirement Act and earned benefits which they have paid for by payroll contributions under the Social Security Act.

After all, these spouses paid for social-security benefits in their own right and they are entitled to them.

In this connection, I understand the cost of such an amendment is minute as compared to moral obligation of giving a person benefits they have paid for and acquired in their own right.

Another discriminatory practice that should be abolished is the requirement that an annuitant must sever all connections with employment outside the railroad industry before he becomes eligible for railroad-retirement benefits.

In the earlier part of my statement, when explaining the purpose of my bills, H. R. 3118 and H. R. 3421, designed to repeal the requirement, I stated :

Here is a situation where a retired railroad employee is denied the opportunity to serve as a clerical employee of a church, civic, fraternal, or social organization.

Mr. Chairman, if it is not possible to repeal this provision, I urge that we write into existing law a provision that will permit these retired employees to earn up to $100 monthly in this particular type of employment.

In other words, such a ceiling on income would be comparable to the income limitations placed on persons retired because of disability.

Here, again, the cost of my bill, H. R. 3118, I am informed, would be insignificant and would have virtually no effect on the retirement fund.

Over a period of years, I have been besieged by thousands of my constituents actively employed in the railroad industry to endeavor to secure enactment of legislation that would reduce the retirement age to 60 years or permit retirement after 30 or 35 years of service with the annuity to be computed on the 5 years of highest earnings.

As a result of the interest of my constituents, I introduced in previous Congresses legislation to effect earlier retirement and I hope that during your deliberations you will give consideration to my two bills on the subject, H.R. 3315 and H. R. 3116.

Mr. Chairman, I want to reiterate the compelling need to liberalize the provisions of the Railroad Retirement Act and to increase its benefits.

This committee has a herculean task in trying to amend the Railroad Retirement Act and, at the same time, find the means of paying the cost of such amendments, as well as liquidate the $169 million deficit referred to by President Eisenhower.

As in previous years, like other Representatives whose districts have a heavy railroad population, I await the results of your deliberations

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