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course, that the employee is eligible for such a dual benefit. As a part of the annuity provided by section 2(a) (1) of the Act, the dual benefit. component is subject to the work restrictions prescribed in section 2(e) of the Act in the same manner as all other components of the employee's annuity, and such component will be considered in determining whether the guaranty provision in section 3 (f) (3) of the Act would provide a larger benefit amount than the annuity components provided by sections 3 (a),3(b),3(c).3(d), and 3(h).

Subsection (i) of section 3 sets forth the method for determining an employee's "years of service" which are to be used in computing the annuity to which he is entitled under section 2(a) (1). An employee's railroad service, including service prior to 1937, is credited on a monthly basis in the same manner, and subject to the same limitations, as under section 3(b) of the 1937 Act. Subdivision (1) provides credit for all service performed after 1936, and subdivision (3) provides credit for service prior to 1937 if the employee was an employee on August 29, 1935 (the date on which the Railroad Retirement Act of 1935 was enacted); as in the 1937 Act, however, service rendered prior to 1937 cannot operate to increase an employee's total years of service above 30. An employee's military service which was rendered during a war service period as defined in section 1(g) of the Act will be included in his years of service, in accordance with subdivision (2), subject to the same requirements as under the 1937 Act. One of these requirements is that the military service must have been preceded in the year of entry into military service, or the year prior thereto, by creditable railroad service.

The "average monthly compensation" upon which an employee's annuity will be computed under section 3 is determined in the manner provided in subsection (j) of section 3, which is identical to section 3(c) of the 1937 Act. The method of determining the average monthly compensation for a particular employee and the limitations on the amount of compensation creditable for a particular month remain the same as under the 1937 Act.

The provisions of subsection (k) are the same as those contained in section 3(d) of the 1937 Act and provide merely that an employee representative's annuity is determined in the same manner as if the employee organization by which he was employed were an employer. Subsection (1), which is substantively identical to section 2(j) of the 1937 act, provides that any age reduction applicable to an increase in a reduced-age annuity awarded under paragraph (iii) of section 2(a) (1) or under section 2(c) (2) will be made on the basis of the annuitant's age at the time the increase becomes effective, not on the basis of his or her age at the time his or her reduced-age annuity first began to accrue.

A major purpose of the new Railroad Retirement Act is to eliminate, with respect to future service, the "windfall" element in cases where benefits are payable to a single individual under both the Railroad Retirement Act and the Social Security Act. To accomplish this purpose, subsection (m) of section 3 provides that the social security level, component of an employee's annuity (which is provided by subsection (a) of section 3) will be reduced by the amount of any monthly insurance benefit which the employee actually receives under the Social Security Act. Thus railroad employees, like employees in other major

41

private industries, will, in the future receive retirement benefits which are supplemental to, rather than additional to, social security benefits. As discussed above, rights of employees to amounts which accrued prior to the effective date of the new Act are preserved by subsection (h) of section 3.

Section 4

Section 4 of the new Act contains the computation provisions for spouse and survivor annuities under sections 2(c) and 2(d) of the Act. Subsection (a) provides that a spouse will receive an amount equal to the amount that would have been payable to him or her under the Social Security Act-without regard to the age reductions and work deductions contained in that Act-if the railroad service after 1936 of the employee upon whose earnings his or her spouse's annuity is based were included in the term employment as defined in that Act. This amount is, pursuant to the provisions of subsection (i), reduced by the amount of any wife's or husband's insurance benefit which the spouse receives under the Social Security Act. Since the new Act, unlike the Social Security Act, provides unreduced age annuities for spouses who have attained age 60 if the employee has also attained age 60 and has 30 years of service, subdivision (2) of subsection (a) provides that in such a case the spouse will be deemed to have attained age 65 for the purpose of determining his or her social security level benefit amount pursuant to the provisions of this subsection.

Subsection (b) provides a second component of the spouse's annuity, which will be equal to 50 percent of that portion of the employee's annuity as is computed under subsections (b), (c), and (d) of section 3. except this amount will be reduced pursuant to the first proviso if the spouse is entitled to a dual benefit provided by section 4(e) of the Act. This reduction corresponds to the reduction required by the so-called "offset provisions" contained in the 1937 Act (which are discussed in the explanation of section 3 (b) of the new Act). The total of the amount of the spouse's annuity provided by this subsection plus the amount provided under subsection (a) (or the amount which would have been payable to the spouse under subsection (a) if the spouse were not receiving either a benefit on the basis of her or his own earnings record or a 30cial security wife's or husband's insurance benefit) cannot exceed the so-called spouse maximum which is carried over from the 1937 Act. This spouse maximum provision specifies that the maximum payable under the Act to a spouse cannot exceed 110 percent of the maximum possible wife's insurance benefit payable to any wife under the Social Security Act. If the spouse's combined annuity amounts would exceed this maximum, her or his annuity amount as computed under this subsection will be reduced until her or his total spouse's annuity amounts equals that maximum.

Although section 4(i) (2) of the new Act provides that the social security level component of a railroad retirement spouse's annuity will be reduced by the social security level component of the spouse's employee annuity, it was not intended that the total amount of a spouses railroad retirement annuity be reduced because of her entitlement to an employee annuity based on her own railroad service unless, as is provided by section 2(b) (3) of the new Act, both the husband and wife first entered railroad service subsequent to December

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31, 1974. Accordingly, the sound proviso of section 4 (b) increases the staff conponent of the spouse annuity by the amount of any such reduction in the social security level component of her annuity.

The maximum annuity amounts which can be paid to an employee and his spouse combined are prescribed by subsection (c) of section 4. If the amount of the spouse's annuity as computed under subsections (a) and (b) (before any reduction because of the spouse's receipt of a social security wife's or husband's insurance benefit) as of the date on which the employee's annuity under section 2(a) (1) began to accrue plus those portions of the employee's annuity and supplemental annuity which are subject to the maximum prescribed in section 3 (f) (1) would, before any age reductions, exceed the maximum amount determined under section 3(f) (1), first the spouse's annuity as computed under subsection (b) as of the date on which the employee's annuity began to accrue, then, if necessary, the employee's supplemental annuity, and finally, if necessary, the employee's annuity as computed under subsections (b), (c), and (d) of section 3 at the time his annuity began to accrue will be reduced until the total of such amounts equals the maximum amount or until such amounts are reduced to zero, whichever occurs first. As under the maximum provisions prescribed in section 3 (f) (1), the provisions of this subsection are not applicable with respect to any increases in the amounts subject thereto which become effective after the date on which the employee's annuity began to accrue. Furthermore, the maximum prescribed by this subsection, like the maximum prescribed by section 3(f) (1), cannot operate to reduce the combined monthly benefit subject thereto below $1200 nor can it operate to reduce the social security level component of the spouse's annuity as computed under section 4(a).

Subsection (d) of section 4 provides cost-of-living increases in the spouse's annuity component determined under section 4(b). Any such increases will be by the same percentage, or percentages, as the employee's annuity was increased under the provisions of section 3(g) after such annuity became effective. Through the operation of section 4(b), the spouse's annuity when computed reflected any cost-of-living increases in the employee's annuity prior to its effective date, subject to the limitation on the total amount of a spouse's annuity as provided under the second proviso of section 4 (b). Thus, this component of the spouse's annuity will be increased whenever the comparable component of the employee's annuity is increased, even if the spouse was not receiving an annuity at the time a particular increase became effective. The dual benefits for spouses of employees, in cases where either the employee was "qualified" under both the Social Security Act and the Railroad Retirement Act or the employee was "qualified" under the Railroad Retirement Act and the spouse was "qualified" under the Social Security Act, are provided by subsection (e) of section 4. Subdivision (1) provides that if (A) the employee had engaged in railroad service during 1974, or had a current connection with the railroad industry on December 31, 1974, or at the time his annuity began to accrue, or had 25 years of service prior to January 1, 1975, and (B) the employee had 10 years of service on December 31, 1974, and the spouse was permanently insured under the Social Se

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curity Act on that date, the spouse will be entitled to a dual benefit equal to the smaller of a social security benefit based on her own earnings prior to January 1, 1975, or a social security wife's or husband's benefit based on the employee's railroad earnings after December 31, 1936, and before January 1, 1975, but not less than 50 percent of the employee's dual benefit, if any, under section 3 (h) (1) without regard to any increases under section 3 (h) (5).

For the purposes of the computations under this subdivision and subdivision (2), the hypothetical social security benefits will be in the amount that the spouse would have received at age 65, or, if the spouse attained age 65 prior to January 1, 1975, the amount which she would have received for the month of January 1975, under the provisions of the Social Security Act as in effect on December 31, 1974.

Subdivision (2) provides the dual benefit where the employee did not meet the conditions specified in clause (A) of the preceding paragraph, but where the employee did have 10 years of service prior to January 1, 1975, and the spouse was permanently insured under the Social Security Act as of the end of the year prior to 1975 in which the employee last engaged in railroad service. The dual benefit in such a case will be determined in the same manner as the dual benefit provided by subdivision (1), except that only the spouse's social security earnings as of the end of the year in which the employee last engaged in railroad service will be used in determining the amount of the social security benefit to which the spouse would have been entitled on the basis of her own earnings.

The dual benefit for the spouse of an employee, in a case where the employee is entitled to a dual benefit under section 3 (h) (1) or 3(h) (3) but the spouse is not entitled to a dual benefit under subdivision (1) or (2) of section 4 (e), will, as is provided by subdivision (3) of section 4(e), be equal to 50 percent of the employee's dual benefit under section 3(h) (1) or 3(h) (2) prior to any increases under subdivision (5) of section 3(h).

The amount of a dual benefit provided under the first three subdivisions of section 4 (e) will be increased, under subdivision (4), by the percentages of any cost-of-living increases in social security wife's or husband's insurance benefits pursuant to the automatic cost-ofliving provisions of section 215 (i) of the Social Security Act which became effective after December 31, 1974, and before the date on which the employee's annuity under section 2(a) (1) began to accrue, or by the percentages of any such increases which would have been provided during that period under those provisions if no social security general benefit increases had been provided.

The amounts of the annuities awarded to survivors of deceased employees under section 2(d) is determined under the provisions of subsections (f), (g), and (h) of section 4. Subsection (f) provides that a survivor (i.e., a qualified widow, widower, parent, or child) will receive an amount equal to the amount that would have been payable to her or him, as a survivor, under the Social Security Act if the railroad service after 1936 of the employee upon whose earnings her or his survivor's annuity is based were included in the term employment as defined in that Act.

As in the case of a disabled employee annuitant, a child or a widow or widower who is entitled to an annuity as such based on disability

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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 (j) of the 1937 Act, the amounts of such annuities differ. Section 3(j) 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 supplemental 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 1/2 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