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1 the amendments made by title III and title IV of this Act

2 shall become effective on January 1, 1975. 3 SEC. 604. The amendments made by the provisions of

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title V' of this Act shall become effective on January 1, 1975,

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and shall apply only with respect to compensation paid for

6 services rendered on or after that date. 7 SEC. 605. The amendment made by section 601 of this 8 Act shall be effective on the enactment date of this Act and 9 shall apply with respect to any increase in annuities under 10 the Railroad Retirement Act of 1937 which becomes effec

11 tive after June 30, 1974.

Passed the House of Representatives September 12, 1974.
Attest:

W. PAT JENNINGS,

C'lerk.

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COMMITTEE ON LABOR AND

PUBLIC WELFARE
UNITED STATES SENATE
TOGETHER WITH SUPPLEMENTAL VIEWS

ON

H.R. 15301

SEPTEMPER 23, 1974.--Ordered to be printed

U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 1974

40-042 0

COMMITTEE ON LABOR AND PUBLIC WELFARE

HARRISON A. WILLIAMS, New Jersey, Chairman JENXINGS RANDOLPH, West Virginia JACOB K. JAVITS, New York CLAIBORNE PELL, Rhode Island

PETER H. DOMINICK, Colorado EDWARD M. KENNEDY, Massachusetts RICHARD S. SCHWEIKER, Pennsylvania GAYLORD NELSON, Wisconsin

ROBERT TAFT, JR., Ohio WALTER F. MONDALE, Minnesota

J. GLENN BEALL JR., Maryland
THOMAS F. EAGLETON, Missouri

ROBERT T. STAFFORD, Vermont
ALAN CRANSTON, California
HAROLD E. HUGHES, Iowa
WILLIAM D. HATHAWAY, Maine

JOSEPH P. MCMURRAY, Staf Director and

Chief Legislative Counsel
MARJORIE M. WHITTAKER, Chief Clerk
ROY H. MILLENSOX, Minority Staf Director

SUBCOMMITTEE ON RAILROAD RETIREMENT

WILLIAM D. HATHAWAY, Maine, Chairman CLAIBORNE PELL, Rhode Island

RICHARD S. SCHWEIKER, Pennsylvania GAYLORD NELSON, Wisconsin

ROBERT TAFT, JR., Ohio HAROLD E. HUGHES, Iowa

J. GLENN BEALL, JR., Maryland
WALTER F. MONDALE, Minnesota

Angus S. KING, Jr., Counsel
Don ZIMMERMAN, Minority Counsel

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Mr. HATHAWAY, from the Committee on Labor and Public Welfare,

submitted the following

REPORT

together with SUPPLEMENTAL VIEWS

[To accompany H.R. 15301)

The Committee on Labor and Public Welfare, 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 amendments and recommend that the bill as amended do pass.

PRINCIPAL PURPOSF. 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 excess costs to the

Railroad Retirement System which 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 estimated at $285 million per year on a level-cost basis through the year 2000.

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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JUSTIFICATION FOR APPROPRIATIONS The Railroad Retirement System today has 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 provided for a system of financial interchange, under which the Railroad Retirement System was reinsured with the Social Security System. U’nder 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 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 let. For this reason, whenever an individual receiving Railroad Retirement benefits also qualifies for Social Security benefits, the amounts paid 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 rising o f this situation is in excess of $1 billion, and it is estimat

rs of the future lost reimbursement

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