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Masten, John K., senior citizen (retired).

Dennis, C. L., international president, Brotherhood of Railway and Air-
line Clerks, in behalf of the Congress of Railway Unions and Railway
Labor Executive, Miami, Fla.; Jim Kennedy, general legislative
counsel, Washington, D.C.--.

Prepared statement-----

Hacking, James M., legislative representative of the Retired Teachers As-
sociation and the American Association of Retired Persons---

Prepared statement-----

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291

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Morton, Alexander L.----

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APPENDIX

Text of:

House Report 93-1345 to accompany H.R. 15301.

471

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AUGUST 29, 1974.-Committed to the Committee of the Whole House
on the State of the Union and ordered to be printed

U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON: 1974

COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE
HARLEY O. STAGGERS, West Virginia, Chairman

TORBERT H. MACDONALD, Massachusetts SAMUEL L. DEVINE, Ohio

JOHN JARMAN, Oklahoma

JOHN E. MOSS, California

JOHN D. DINGELL, Michigan
PAUL G. ROGERS, Florida

LIONEL VAN DEERLIN, California

J. J. PICKLE, Texas

FRED B. ROONEY, Pennsylvania
JOHN M. MURPHY, New York

DAVID E. SATTERFIELD III, Virginia
BROCK ADAMS, Washington

W. S. (BILL) STUCKEY, JR., Georgia
PETER N. KYROS, Maine

BOB ECKHARDT, Texas
RICHARDSON PREYER, North Carolina
BERTRAM L. PODELL, New York
HENRY HELSTOSKI, New Jersey
JAMES W. SYMINGTON, Missouri
CHARLES J. CARNEY, Ohio
RALPH H. METCALFE, Illinois
GOODLOE E. BYRON, Maryland
WILLIAM R. ROY, Kansas
JOHN BRECKINRIDGE, Kentucky
THOMAS A. LUKEN, Ohio

ANCHER NELSEN, Minnesota

JAMES T. BROYHILL, North Carolina
TIM LEE CARTER, Kentucky
CLARENCE J. BROWN, Ohio
DAN KUYKENDALL, Tennessee
JOE SKUBITZ, Kansas

JAMES F. HASTINGS, New York

JAMES M. COLLINS, Texas

LOUIS FREY, JR., Florida

JOHN WARE, Pennsylvania

JOHN Y. MCCOLLISTER, Nebraska
RICHARD G. SHOUP, Montana

BARRY M. GOLDWATER, JR., California
NORMAN F. LENT, New York

H. JOHN HEINZ III, Pennsylvania
WILLIAM H. HUDNUT III, Indiana
SAMUEL H. YOUNG, Illinois

EDWARD R. MADIGAN, Illinois

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AUGUST 29, 1974.-Committed to the Committee of the Whole House on the State of the Union and ordered to be printed

Mr. STAGGERS, from the Committee on Interstate and Foreign
Commerce, submitted the following

REPORT

together with

MINORITY VIEWS

[To accompany H.R. 15301]

The Committee on Interstate and Foreign Commerce, to whom was referred the bill (H.R. 15301) to amend the Railroad Retirement Act of 1937 to revise the retirement system for employees of employers covered thereunder, and for other purposes, having considered the same, report favorably thereon with an amendment and recommend that the bill as amended do pass.

The amendment strikes out all after the enacting clause and inserts a new text which is set forth in the reported bill in italic type. The bill was ordered reported by a voice vote.

PRINCIPAL PURPOSE OF THE BILL

The bill provides for a complete restructuring of the Railroad Retirement Act of 1937, and will place it on a sound financial basis. Railroad Retirement benefits will hereafter consist of two components the first tier will be a benefit computed under the Social Security Act, counting all railroad employment as Social Security covered employment, and combining that service with all Social Security covered employment; and a second tier of benefits based on railroad service alone computed under the Railroad Retirement Act. This new technique of computing benefits will bring about more adequate coordination between the Railroad Retirement Act and the Social Security Act, thereby preventing future losses to the Railroad

Retirement System under the financial interchange program. It is these losses that threaten the existing system with bankruptcy.

Persons in receipt of both Railroad Retirement and Social Security benefits as of December 31, 1974 will continue to receive benefits under both systems without any reduction in those benefits. Persons who already have vested rights under both the Railroad Retirement and the Social Security systems will in the future be permitted to receive benefits computed under both systems just as is true under existing law. The excess costs of paying benefits to persons described in this paragraph will be met through appropriations approximating $285 million per year through the year 2000. No other costs to the United States are involved in the bill.

Persons not yet retired (other than those with vested rights) will have their benefits computed under the new "two tier" system described in the first paragraph above.

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The Railroad Retirement System is today operating at a serious actuarial deficit, amounting to over 9 percent of taxable payroll. 7.72 percent of this deficit arises because of inadequate coordination between the Railroad Retirement Act and the Social Security Act.

In 1951 the Congress created a program known as financial interchange, under which the Railroad Retirement System was reinsured with the Social Security System. Under this program, the Railroad Retirement System pays to the Social Security System each year an amount equal to the taxes which would have been paid by all railroad employees, and by the railroads, if railroad service were service covered under the Social Security Act. The Social Security System, on the other hand, transfers to the Railroad Retirement System each year an amount equal to the total of Social Security benefits which would have been paid to all retired railroad employees, their dependents, and survivors if all railroad service of the employees since 1936 had been service covered under the Social Security Act. The net result of the financial interchange program has been a transfer over the years of $8.2 billion from the Social Security System to the Railroad Retirement System.

The Social Security Act prohibits payment of multiple benefits to any individual under that Act. For this reason, whenever an individual receiving Railroad Retirement benefits qualifies for Social Security benefits, the amounts credited to the Railroad Retirement. system under financial interchange on account of that individual are reduced by the total of the Social Security benefits which that individual receives. The lost reimbursement to the Railroad Retirement System over the years arising out of this situation is in excess of $4 billion, and it is estimated that the present value of the future lost

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