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An employee's total benefits under the new Act will be the sum of up to six components, each of which is explained below. In general, however, the first component-provided by subsection (a)—will be the
uivalent of the benefit that would be paid under the Social Security Ict on the basic of the employee's combined railroad and non railroad
rvice, and the sixth component-provided by subsection (h)-preFries the amount, for employees who qualify therefore, resulting from previous entitlement to both railroad retirement and social security benefits. The remaining components-provided by subsection (b),
c), (d), and (e)-in combination comprise the “staff” component of the einployee's annuity, i.e., the annuity amount to which the employee will be entitled under the new Act over and above the amount equivalent to that provided nonrailroad employees under the Social Security Art plus, in some instances, the additional amount under subsection (h).
The first component is provided by subsection (a), pursuant to which an employee will receive an amount equal to the amount that would have been payable to him under the Social Security Act--without regard to the age reduction and work deductions contained in that
Art-if his service as a railroad employee after December 31, 1936, were included in the term employment as defined in that Act. This amount, as is provided by subsection (m), will be reduced by the amount of any monthly insurance benefit actually payable to an emplovee for a particular month under the Social Security Act. Since both the new Act and the 1937 Act, unlike the Social Security Act, provide un reduced age annuities for employees who have attained age *) and have performed at least 30 years of service and disability annuities for employees who are disabled only for work in their last railroad occupations, subdivision (2) of subsection (a) provides that, for purposes of determining the amount of the social security level component, an individual age 60 with 30 years of service is deemed to have attained age 65 (except for purposes of work recomputations made in accordance with the provisions of section 215(f) of the Social Security Act--the work recomputations will thus be made on the basis of the annuitant's actual age) and an individual entitled to a disability annuity under section 2 of the 1974 Act is deemed to meet the eligibility requirements for social security disability benefits.
The above-mentioned deeming provision in cases involving railroad retirement disability annuitants would also have an effect on those entitled to such annuities based on total disability. The Social Security Art, unlike either the 1937 Act or the 1974 Act, requires that a disabled individual have a specified number of quarters of coverage (in most rases 20) during a specified period (in most cases a 40-quarter period) prior to the time his disability is determined to have begun and also provides that disability benefits can begin only after a five-month waiting period following the date of disability. The deeming provision in question will operate to make the social security level component payable without regard to these two requirements.
Subsection (b) provides the second component of the employee's annuity and relates solely to service performed prior to January 1, 1975. This component, as is provided in subdivision (1), is determined by computing an annuity under the 1937 Act as in effect prior to January 1, 1975, on the basis of the employee's years of service and compensation credited prior to that date. In this regard, it should be noted that since section 3(b) (1) expressly provides that the 1937 Act computation will be based only on the employee's railroad service and compensation prior to January 1, 1975, an amount computed for purposes of that section under the so-called social security minimum guaranty provision contained in section 3(e) of the 1937 Act will also be based solely on the employee's railroad service and compensation prior to that date without this limitation, a computation under the guaranty provision would be based on the employee's combined railroad and nonroalroad service and earnings. In addition, since social security earnings will be excluded in computing the amount under the guaranty provision of the 1937 Act, any social security benefit to which the employee might have been entitled on the basis of such earnings will also be disregarded in making this computation.
For the purpose of computing an annuity under the 1937 Act, it is assumed that the individual met the eligibility requirements for an annuity under that Act-in this regard, it is specifically provided that an annuity will be computed under th 1937 Act even if the employee did not have ten years of service on January 1, 1975---and it is further assumed that the employee was not entitled to any other benefit under either that Act or the Social Security Act except in cases where the employee is entitled to a dual benefit under subsection (h) (1) or (h)(2) of section 3. As a result of this latter assumption, the amount computed will not be reduced by reason of the employee's presumed entitlement to a railroad retirement supplemental annuity. However, if the employee is entitled to a dual benefit under subsection (h), the annuity amount computed under the 1937 Act will be reduced in accordance with the so-called "offset provisions” contained in that Act. Briefly stated, these offset provisions required that, where an employee was entitled to both railroad retirement and social security benefits, the railroad retirement anmuity increases provided by the 1966, 1968, and 1970 railroad retirement amendments be reduced by the approximate amount of the increases which the employee received in his social security benefit as a result of the social security amendments of 1965, 1967, and 1969. The social security benefit used in determining the amount of the reductions will be the social security benefit based on the employee's wages and self-employment income under the Social Security Act prior to (4) January 1, 1973, if the employee's dual benefit is determined under section 3 (h)(1) or (B) prior to the January 1 of the vear following the vear in which the employee last engaged in railroad service if his dual benefit is determined under section 3(h) (2). The provisions of the next to the last sentence of subdivision (1) give the Railroad Retirement Board the authority to approximate the reduction required by the offset provisions in a particular case.
In addition to the above discussed computation, subdivision (1) provides for the computation of a so called imputed social security benefit which would have been payable to the employee ainder the Social Security Act as in effect prior to January 1, 1975), if his railroad service after December 31, 1936, and before January 1, 1975, had been covered under that Act. For purposes of this computation it is assumed that the employee met the requirements for an unreduced social scurity benefit based on age and that he had no wages or selfemployment income under that Act other than wages derived from the railroad service in question; thus, the imputed social security benetit will be based on railroad service only. In computing this imputed social security benefit, the last sentence of subdivision (1) provides that 18 computation years will be used in computing an employee's average monthly wage. As a result of this provision, the computation Vears used will be the same for all employees, regardless of their actual age as of January 1, 1975, and, therefore, the imputed social security benefit will not differ because of age for employees with identical earnings and service histories as of that date.
The amount of the annuity component provided by subdivision (1) of subsection (b) is determined by subtracting the above-discussed imputed social security benefit from the annuity computed under the provisions of the 1937 Act. The employee will, of course, be entitled to a social security level component in accordance with subsection (a) of xertion 3, which will be based on his railroad service, as well as his nonrailroad service, performed both before and after January 1, 1975. Thus, if the employee's imputed social security benefit based on railroad service before that date were not subtracted from his annuity as computed under the 1937 Act he would, in effect, receive a double benefit based on that service.
The following example will illustrate both the manner in which the annuity component will be computed under subdivision (1) of sertion 3(b) and also the basis for the subtraction of an imputed social security benefit: Assume that an employee attains age 65 on December 31, 1974, and as of that date has been credited with 30 years of service and maximum compensation under the Railroad Retirement Act. His annuity as computed under the present 1937 Act without any reduction for receipt of a supplemental annuity would he $721. His imputed social security benefit computed on the basis of his railroad service alone would be $320 (this railroad service will, of course, be included in the computation of his social security level component under subsection (a), along with any nonrailroad employment which he might have performed under the Social Security Act, and, therefore, his annuity amount under subsection (a) will be at least $320 before any reduction due to actual receipt of a social security benefit). Subtracting this $320 from the $521 amount computed under the 1937 Act, leaves $201 as the amount of that portion of his annuity as is provided by subdivision (1) of subsection (b).
Subdivision (2) of subsection (b) provides that the annuity component computed under subdivision (1) will be increased by 65 percent of the increase in the unadjusted ('onsumer Price Index during the period from September 30, 1976, through the earlier of (A) September 30 of the year preceding the year in which the employee's annuity begins to accrue or (B) September 30, 1980. The increase in the unadjusted Consumer Price Index will be determined by comparing such Index for September, 1976, with such Index for September of the year preceding the vear in which the employee's annuity began or for September, 1980, whichever is applicable in a given case.
The third component of the employee's annuity, which is provided by subsection (c) of section 3, also relates to service performed prior to January 1, 1975, but is provided only for employees who have also engaged in railroad service after December 31, 1974. The amount of this component is $1.50 for each of the employee's first 10 years of service prior to January 1, 1975, plus $1.00 for each year of the employee's service prior to that date in excess of 10 years of service.
Subsection (d) provides the fourth component of the employee's annuity and relates solely to service performed subsequent to December 31, 1974. Subdivision (1) of this subsection provides an annuity amount equal to (A) 1,2 percent of the employee's average monthly compensation for his years of service after 1974 times his years of service after 1974 plus (B) $4.00 for each of the employee's years of service after 1974. Subdivision (2) provides cost-of-living adjustments in the $4 per year of service portion of the annuity component computed under subdivision (1). The amount determined under subdivision (1) is increased by 65 percent of the increase in the unadjusted Consumer Price Index from September 30, 1976, through the c'arlier of September 30 of the year preceding the year in which the employee's annuity begins or September 30, 1980. Subdivision (3) provides for an increase in the portion of the annuity computed on the basis of the employee's average monthly compensation of 65 percent of the aforementioned increase in the Consumer Price Index, less the amount by which such amount under subdivision (1) was greater than it would have been if the limitation on creditable compensation which was in effect in the month from which the first increase in the Consumer Price Index was measured (September 1976) had remained in effect. The complexity of the language required to attain this result, contained in the introduced bill, has led the committee to restate it in terms of mathematical formulae. As under section 3(b)(2), which provides a cost-of-living adjustment in a portion of the annuity based on service prior to January 1, 1975, the increase in the unadjusted Consumer Price Index will be determined by comparing such Index for September, 1976, with such Index for September of the year preceding the year in which the employee's annuity began or for September, 1980, whichever is applicable.
The amount of an employee's supplemental annuity-which amount is the fifth possible component of an employee's total benefit-under section 2(b) of the 1974 Act is provided by subsection (e) of section 3. Although the eligibility requirements for a supplemental annuity are generally the same as those contained in section 3(i) of the 1937 Act, the amounts of such annuities differ, Section 3() of the 1937 Act provides a supplemental annuity of $45 plus an additional $5 for each year of service in excess of 25, up to a maximum annuity of $70 (for 30 or more years of service). Section 3(e) of the 1974 Act provides a supplemental annuity of $23 plus an additional $4 for each year of service in excess of 25, up to a maximum of $43 (for 30 or more years of service). Under the 1937 Act, however, an employee's regular railroad retirement annuity was smaller if he received a supplemental annuity, whereas under the 1974 Act an employee's receipt of a sup
plemental annuity will not affect the amount of his regular annuity. The net result will be the same for the 1974 Act as it is in the 1937 Act.
Subsection (f) of section 3 sets forth the maximum and minimum provisions applicable to employee annuities. Under subdivision (1), if the total amount of the employee's annuity as computed under subsection (a) through (d) of section 3 plus his supplemental annuity in the amount provided under subsection (e) would, before any reduction on account of age or receipt of a social security benefit and disregarding any increases in the employee's annuity which become effective after the date his annuity begins to accrue, exceed an amount equal to the sum of (A) 100 percent of his “final average monthly compensation" up to 12 of the maximum creditable monthly compensation during the year in which his annuity begins plus (B) 80 percent of his "final average monthly compensation" in excess of 12 of such maximum creditable monthly compensation, his supplemental annuity first and then, if necessary, his annuity as computed under subsections (b) through (d) of section 3 will be reduced until the total of the annuity and supplemental annuity amounts equals the sum determined under clauses (A) and (B) above or until the supplemental annuity and the annuity amounts determined under subsections (b) through (d) are reduced to zero, whichever occurs first. As can be seen, this maximum provision does not operate to reduce the social security level component of an employee's annuity as determined in accordance with the provisions of section 3(a).
Furthermore, the proviso contained in subdivision (1) of section 3(f) assures that any reductions required by that subdivision will not operate to reduce an employee's total monthly annuity and supplemental annuity below $1,200. For purposes of computing the maximum under this subdivision, the "final average monthly compensation" for a particular employee is obtained by dividing 24 into the total compensation (subject to the limitations prescribed in section 3(j) on the amount of compensation which may be considered for a particular month) received by the employee during his two calendar years of highest compensation, consecutive or otherwise, during the ten-year period ending with December 31 of the year in which his annuity begins to accrue. For this purpose, wages and self-employment income creditable under the Social Security Act are considered to be compensation, along with compensation creditable under the Railroad Retirement Act.
Subdivision (2) of subsection (f) guarantees that, in cases where an employee's annuity under the new Act began to accrue before January 1, 1983, the total of the annuities (other than amounts payable under subsection (h)) and supplemental annuity payable to the employee and his spouse for any month under the new Act (before any reduction due to receipt of social security benefits and before any reduction pursuant to the earnings limitations provisions of section 2(f) of the new Act) cannot be less than the total amount that would have been payable to the employee and his spouse for that month under the provisions of the Railroad Retirement Act of 1937 as in effect on December 31, 1974, on the basis of the maximum monthly compensation creditable at that time. In computing benefit amounts under the 1937 Act, the Railroad Retirement Board will have the authority to