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ceive their annuities under the Railroad Retirement Act in addition to their salaries for services for nonemployer, while the career workers, upon attaining retirement age, have only the annuities to rely upon. The purpose of the provisions, which the bill would eliminate, was to avoid this discrimination. Congress then apparently accepted the views in support of these provisions and has continued them in effect ever since although amending the act in other respects on many occasions.

Aside from the question as to the desirability otherwise, the bill would impose additional costs on the railroad retirement system, which, it is estimated, would come to about $10 million a year or 0.19 percent of payroll. In view of this and since the Board has always opposed any proposal for amendment which would increase costs without providing a method for financing them, the Board recommends that the bill not be enacted.

Inasmuch as hearings on bills to amend the Railroad Retirement Act have been set for February 3, 1959, this report is submitted without prior clearance with the Bureau of the Budget. A copy of the report is being forwarded to the Bureau of the Budget today and you will be informed of the views of that Bureau as soon as they are received.

Sincerely yours,

HOWARD W. HABERMEYER, Chairman.

UNITED STATES OF AMERICA,

RAILROAD RETIREMENT BOARD,
Chicago, Ill., January 29, 1959.

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. 220, which was introduced in the House of Representatives on January 7, 1959, by Mr. Poff.

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 This sentence, however, has already been repealed by Congress, by section 2, Public Law No. 383, 84th Congress, 1st session, approved August 12, 1955.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 payroll, 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 16.68 percent of payroll, indicating a present deficiency of about 4.18 percent of payroll, or $213 million a year.

We estimate that the additional costs of the amendments proposed in H.R. 220 would come to approximately 0.21 percent of payroll or $11 million a year on a level basis. This would increase the deficiency from 4.18 to 4.39 percent of payroll or from $213 million to $224 million a year.

In view of the fact that the bill would provide no additional revenue to meet the substantial increase in the costs of benefits the Board feels compelled, for that reason alone, to recommend that no favorable consideration be given to the bill.

Inasmuch as hearings on bills to amend the Railroad Retirement Act have been set for February 3, 1959, this report is submitted without prior clearance with the Bureau of the Budget. A copy of the report is being forwarded to the Bureau of the Budget today and you will be informed of the views of that Bureau as soon as they are received.

Sincerely yours,

HOWARD W. HABERMEYER, Chairman.

UNITED STATES OF AMERICA,
RAILROAD RETIREMENT Board,
Chicago, Ill., January 29, 1959.

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. 223, which was introduced in the House of Representatives on January 7, 1959, by Mr. Powell.

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 ojectionable 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 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 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 the 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 and 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 2.75 percent of payroll (with the $400 limit on monthly compensation), or $154 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 shows that the net level cost of benefits under the act is about 16.68 percent of taxable payroll. Since the actual tax rate is only 12.50 percent, the present benefit structure already involves an actuarial deficiency of 4.18 percent of payroll (with the $350 limit on monthly compensation) which is equivalent to about $213 million a year on a level basis.

The Board, accordingly, recommends that no favorable consideration be given to the bill.

Inasmuch as hearings on bills to amend the Railroad Retirement Act have been set for February 3, 1959, this report is submitted without prior clearance with the Bureau of the Budget. A copy of the report is being forwarded to the Bureau of the Budget today and you will be informed of the views of that Bureau as soon as they are received.

Sincerely yours,

HOWARD W. HABERMEYER, Chairman.

UNITED STATES OF AMERICA,

RAILROAD RETIREMENT Board,
Chicago, Ill., January 29, 1959.

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. 225 introduced in the House of Representatives on January 7, 1959, by Mr. Powell, and the bill H.R. 2223 introduced by Mr. Siler on January 12, 1959.

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 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 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 minimum 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 requirement 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 3.75 percent of payroll, or about $191 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 valuation of the railroad retirement system shows that the net level cost of benefits under the act is 16.68 percent of taxable payroll. Since the actual tax rate ise only 12.50 percent the present benefit structure already involves an actuarial deficiency of 4.18 percent of payroll, which is equivalent to about $213 million a year on a level basis.

4. The effect of the enactment of the bills would be to increase the deficiency to 7.93 percent of payroll or approximately $404 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 revenues 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.

Inasmuch as hearings on bills to amend the Railroad Retirement Act have been set for February 3, 1959, this report is submitted without prior clearance with the Bureau of the Budget. A copy of the report is being forwarded to the Bureau of the Budget today and you will be informed of the views of that Bureau as soon as they are received.

Sincerely yours,

HOWARD W. HABERMEYER, Chairman.

UNITED STATES OF AMERICA RAILROAD RETIREMENT Board,
Chicago, Ill., January 29, 1959.

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. 735 introduced in the House of Representatives on January 7, 1959, by Mrs. Church.

The bill would amend sections 2(f) and 5(i) (1) (i) of the Railroad Retire ment Act with respect to annuities accruing after the date of enactment so that husbands of annuitants would be eligible for a spouse's annuity, and widowers would be eligible for a widower's annuity, based on the wife's employment, without the present condition requiring that they have received at least half of their support from the wife.

The Railroad Retirement Act was amended in 1951 to provide an annuity for husbands (and wives) of annuitants, and for widowers. The Social Security Act already contained provisions for similar benefits which were, and still are, conditional upon the dependency of the husband or widower on his wife, which must be established by proof that he was receiving at least one-half of his support from her when her benefits begin to accrue or at her death. The inclusion of these benefits in the railroad retirement system with the similar conditions for eligibility resulted in conformity with the social security system in this respect. 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. The seventh actuarial valuation of the railroad retirement system shows that the level cost of benefits under the act is 16.68 percent of taxable payroll, indicating a present deficiency of 4.18 percent of payroll or $213 million a year.

We estimate that the additional cost of the amendments proposed in H.R. 735 would come to about 0.10 percent of payroll or approximately $5 million a year on a level basis. This would increase the deficiency from 4.18 to 4.28 percent of payroll or from $213 million to $218 million a year.

In view of the fact that the bill would provide no additional revenue to meet the increase in the cost of benefits, the Board feels compelled, for that reason alone, to recommend that no favorable consideration be given to the bill.

Inasmuch as hearings on bills to amend the Railroad Retirement Act have been set for February 3, 1959, this report is submitted without prior clearance with the Bureau of the Budget. A copy of the report is being forwarded to the Bureau of the Budget today and you will be informed of the views of that Bureau as soon as they are received.

Sincerely yours,

HOWARD W. HABERMEYER, Chairman.

UNITED STATES OF AMERICA RAILROAD RETIREMENT Board,
Chicago, Ill., January 29, 1959.

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. 765 which was introduced in the House of Representatives by Mr. Friedel on January 7, 1959, and which was referred to your committee for consideration.

The bill would amend section 5(i) (1) (ii) of the Railroad Retirement Act of 1937, as amended, so that while earnings by a survivor-annuitant would, under the same circumstances as at present, result in loss to the annuitant of his annuity for the month of such earnings, the provision that no month of any taxable year of 12 months shall be charged with such earnings if the annuitant's earnings for such year are not more than $1,200 (section 203 (e) of the Social Security Act, incorporated into section 5(i) (1) (ii) of the Railroad Retirement Act by reference therein) would be amended (but only insofar as the Railroad Retirement Act is concerned), by raising the critical amount of annual earnings from $1,200 to $1,800.

The provision that if the individual's earnings for a taxable year of less than 12 months are not more than the product of $100 times the number of months in such year, no month in such year shall be charged with any earnings, would be amended by changing the figure $100 to $150.

The Board is of the opinion that these provisions of the Railroad Retirement Act, which literally incorporate the provisions of the Social Security Act, should not be so amended. The two acts together now provide a coordinated and inte grated program of survivor benefits under which claims of the survivors of an employee are paid with respect to his employment record under one system or the other, upon the basis of substantially the same qualifications and conditions and usually in the same amount that the same survivor would be paid under the other system. The Board believes that the introduction of variations or differences between the two systems of the kind here proposed would impair this integration.

The Board opposes the enactment of this bill also for the following reasons: 1. The bill, if enacted, would increase the cost of the railroad retirement system by about 0.05 percent of payroll, or $3 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 shows that the net level cost of benefits under the act is about 16.68 percent of taxable payroll. Since the actual tax is only 12.50 percent the present benefit structure already involves an actuarial deficiency of 4.18 percent of payroll which is equivalent to about $213 million a year on a level 4. The effect of the enactment of the bill would be to increase the deficiency to 4.23 percent of payroll or $216 million a year.

The Board, accordingly, recommends that no favorable consideration be given to the bill.

Inasmuch as hearings on bills to amend the Railroad Retirement Act have been set for February 3, 1959, this report is submitted without prior clearance with the Bureau of the Budget. A copy of the report is being forwarded to the Bureau of the Budget today and you will be informed of the views of that Bureau as soon as they are received.

Sincerely yours,

HOWARD W. HABERMEYER, Chairman.

UNITED STATES OF AMERICA,

RAILROAD RETIREMENT BOARD,
Chicago, Ill., January 29, 1959.

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. 972 which was introduced in the House of Representatives by Mr. Van Zandt on January 7, 1959.

The bill 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 spouse's annuities beginning to accrue on and after the date of enactment of the bill.

The Board is opposed 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 0.20 percent of payroll, or about $10 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 the seventh actuarial valuation on the railroad retirement system shows that the net level cost of benefits under the act is about 16.68 percent of taxable payroll. Since the actual tax rate is only 12.50 percent the present benefit structure already involves an actuarial deficiency of 4.18 percent of payroll which is equivalent to about $213 million a year on a level basis.

4. The effect of the enactment of the bill would be to increase the deficiency to 4.38 percent of payroll or $223 million a year.

The Board, accordingly, recommends that no favorable consideration be given to the bill.

Inasmuch as hearings on bills to amend the Railroad Retirement Act have been set for February 3, 1959, this report is submitted without prior clearance

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