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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(i) 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 10 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

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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 employce'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 approximate the reductions required by the offset provisions contained in that Act.

These offset provisions are discussed in the explanation of section 3(b). Also, increases in amounts computed under the so-called social security minimum guaranty provision contained in section 3(e) of the 1937 Act (which amounts are automatically increased whenever social security benefits are increased) which become effective after December 31, 1974, are disregarded in computing the amount guaran. teed pursuant to the provisions of section 3(f) (2) of the new Act. Thus, the guaranty amount derived from the provisions of the 1937 Act is confined to the amount that would have been payable under that Act as of December 31, 1974, except that additional service and earnings would be taken into account up to the date that the employee's annuity under the new Act began to accrue.

Subdivision (3) of subsection (f) contains a provision similar, in pertinent respects, to the so-called social security minimum guaranty provision contained in section 3(e) of the 1937 Act. Generally speaking, this provision assures that the total monthly benefits to à retired employee and his spouse will not be less than 100 percent (under the 1937 Act the guaranty was 110 percent) of the amount, or the amount additional to that actually paid under the Social Security Act, that would have been payable to the employee's family under the Social Security Act, on the basis of his combined railroad and non railroad earnings, if his railroad earnings after December 31. 1936, had been covered under the Social Security Act. Any exceptions to this general statement (see clauses (i) and (ii) of subdivision (3)) are identical

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to exceptions contained in the comparable provision of the 1937 Act. In view of the nature of the provisions of the new Act concerning the computation of survivor annuities, it is no longer necessary to cover survivors under the guaranty provision in question.

Subsection (g) of section 3 provides for cost-of-living adjustments in the annuity components determined under subsections (b) and (d) for employees whose annuities had begun to accrue on or before the effective date of a particular increase. The effective dates of these increases will be June 1, 1977, June 1, 1978, June 1, 1979, and June 1, 1980, the dates on which social security cost-of-living increases may become effective. Each such increase will be by 32.5 percent of the increase in the unadjusted Consumer Price Index which is used, or which would have been used had there been no general benefit increase under the Social Security Act, in increasing social security benefits for the years in question pursuant to the automatic cost-of-living pruvisions of section 215(i) of the Social Security Act. Unlike section 215(i) of the Social Security Act, however, section 3(g) of the new Railroad Retirement Act will provide a cost-of-living adjustment for a particular year even if the increase in the unadjusted Consumer Price Index on which the adjustment is based is less than 3 percent.

The dual benefits for employees who had ten years of service under the 1937 Act prior to the effective date of the new Act, January 1, 1975, and who were also fully insured under the Social Security Act on December 31, 1974, or, in certain cases, as of the end of the year prior to 1974 in which the employee last engaged in railroad service, are provided by subsection (h) of section 3. Subdivision (1) provides that if the employee (A) had engaged in railroad service during 1974, or (B) had a current connection with the railroad industry either on December 31, 1974, or at the time his annuity began to accrue, or (C) had 25 years of service prior to January 1, 1975, he will be entitled to a dual benefit if he had ten years of service on December 31, 1974, and was permanently insured under the Social Security Act on that date.

The amount of the dual benefit for such an employee will be equal to the difference between (D) the sum of (i) a social security benefit based on the employee's railroad earnings after December 31, 1936, and before January 1, 1975, and (ii) a social security benefit based on his social security earnings prior to January 1, 1975, minus (E) a social security benefit based on his combined railroad and social security earnings after December 31, 1936, and before January 1, 1975. For purposes of this subdivision and subdivision (2), all social security benefits will be in the amount that the employee would have received when he attained age 65, or, if the employee attained age 65 prior to January 1, 1975, the amount which he 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 a dual benefit for employees who did not engage in railroad service during 1974, did not have a current connection with the railroad industry either on December 31, 1974, or at the time their annuities began to accrue, and did not have 25 years of service prior to January 1, 1975, but did have ten years of service prior to January 1, 1975, and were permanentiy insured under the Social Security Act at the end of the year prior to 1975 in which they last engaged in railroad service. The dual benefit for such employees will

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be determined in the same manner as the benefit provided by subdivision (1), except that only the employee's social security earnings up to the end of the year in which he last engaged in railroad service (rather than all his social security earnings prior to January 1, 1975) will be used in computing the amount of the dual benefit.

Subdivisions (3). and (4) of section 3(h) provide dual benefits for employees who had ten years of service under the 1937 Act prior to January 1, 1975, and who are wives, husbands, widows, or widowers of persons who are fully insured under the Social Security Act prior to that date. Subdivision (3) provides that if the employee (A) had engaged in railroad service during 1974, or (B) had a current connection with the railroad industry either on December 31, 1974, or at the time her or his annuity began to accrue, or (C) had 25 years of service prior to January 1, 1975, she or he will be entitled to a dual benefit if he had ten years of service on December 31, 1974, and his or her wife or husband was permanently insured under the Social Security Act on that date. The amount of the dual benefit will be equal to the smaller of (D) a social security wife's, husband's, widow's, or widower's benefit, whichever is applicable in a particular employee's case, based on her or his spouse's social security earnings prior to January 1, 1975 or (E) a social security benefit based on the employee's combined railroad and social security earnings after December 31, 1936, and before January 1, 1975. Of course, because of the dual benefit restrictions contained in the Social Security Act, if the employee is also permanently insured under the Social Security Act on the basis of social security earnings prior to January 1, 1975, the amount computed under clause (D) of the preceding sentence will be reduced by the amount of a social security benefit based on the employee's own social security earnings prior to January 1, 1975.

Subdivision (4) provides the windfall dual benefit where the em· ployee did not meet the conditions specified in clause (A), (B), or (C) of the preceding paragraph, but did have ten years of service prior to January 1, 1975, and his or her wife or husband 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 (3), except that the amounts of the social security benefits computed in making such determination will be based only on social security earnings as of the end of the year prior to 1975 in which the employee last engaged in railroad service.

The amount of a dual benefit provided under subdivision (1), (2), (3), or (4) of subsection (h) will be increased, as is provided under subdivision (5), by the percentages of any cost-of-living increases in social security primary insurance amounts pursuant to the automatic cost-of-living provisions of section 215(i) of the Social Security Act between December 31, 1974, and the date on which the employee's annuity 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 dual benefit provided by section 3(h) is the sixth component of an employee's total benefits under the new Act, provided, of

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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 vears 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() 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

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