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LETTER FROM COMMITTEE ON FINANCE

U.S. SENATE, COMMITTEE ON FINANCE,

Washington, D.C., September 19, 1974. Hon. HARRISON W'ILLIAMS, Chairman, Labor and Public Welfare Committee, Russell Building, Washington, D.C.

DEAR MR. CHAIRMAN: The Railroad Retirement Act amendments bill, H.R. 15301, as passed by the House of Representatives on September 12, 1974, would make certain changes in both the Social Security Act and the Railroad Retirement Tax Act. These changes are essentially conforming amendments of an editorial nature, with one exception.

The bill provides that persons who first qualify for social security benefits after 1974, and who also are eligible for railroad retirement benefits, will have their benefits under both programs combined in a single check paid by the Railroad Retirement Board. The amount of these individuals' social security entitlement, however, would continue to be determined by the Social Security Administration which would certify the amount of the entitlement to the Railroad Retirement Board. The bill in no way relieves the Social Security Administration of the responsibility for informing beneficiaries of the extent of their entitlement under QASDI, and the Railroad Retirement Board would clearly also have an obligation to assure that beneficiaries understand how much of their combined check represents the social security benefit for which they have been determined to be eligible by the Social Security Administration.

Although these changes in the Social Security Act and the Railroad Retirement Tax Act are clearly within the jurisdiction of the Committee on Finance under the rules of the Senate, we do not feel that they are of sufficient substance to make necessary the referral of H.R. 15301 to this Committee, and we do not intend to ask for such a referral. However, the bill as it was originally introduced did include provisions which would have had a significant impact on the financial status of the Social Security Trust Funds. If the Committee on Labor and Public Welfare should modify H.R. 15301 to include these or other provisions substantially affecting the Social Security Act or the Railroad Retirement Tax Act, we would then ask that the bill be referred to the Committee on Finance before the Senate takes up the bill.

At such time as the Committee on Labor and Public Welfare may report H.R. 15302 to the Senate, I would appreciate it if this letter could be included in the Committee report on the bill. With every good wish, I am Sincerely,

RUSSELL Long, Chairman.

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AGENCY REPORTS
THE SECRETARY OF HEALTH, EDUCATION, AND WELFARE,

Washington, D.C., September 18, 1974.
Hon. WILLIAM D. HATHAWAY,
Chairman, Subcommittee on Railroad Retirement, Committee on

Labor and Public Welfare, U.S. Senate, Washington, D.C. DEAR MR. CHAIRMAN: This letter is to advise you of our views on certain provisions of proposals to restructure the railroad retirement system, including S. 3612, since these proposals have major implications for the social security program.

As you know, S. 3612 is identical to H.R. 15301, as introduced. We found H.R. 15301 to be objectionable from the standpoint of the social security program in important respects; those objections are stated in detail in the enclosed copy of the testimony of Under Secretary Carlucci before the House Committee on Interstate and Foreign Commerce. Subsequently the Committee amended H.R. 15301 to substitute new provisions for those to which we had objected. On September 12, the House passed H.R. 15301 in a form substantially the same as the bill reported by the Committee.

Among the reasons we objected to provisions of H.R. 15301, as introduced, was the fact that this bill would have shifted to the social security trust funds the additional costs now borne by the railroad retirement system, as well as new costs, in respect to persons who are already vested for benefits under both the railroad retirement and social security systems. Under the bill reported by the Committee, these costs would instead be met by appropriations from general revenues of some $285 million annually, on a level basis, through the year 2000. We have been advised by the Office of Management and Budget that the Administration has strong obiections to this proposed use of general revenues to subsidize the railroad retirement system and believes that any additional financing for that system should be provided by the railroad industry.

Both the original bill and the Committee-reported bill contain provisions concerning the method of computing and paying benefits in dual benefit cases which we believe are objectionable. In our view, the dual benefits problems which the Committee was addressing could be eliminated over the long run in a logical and relatively simple way by extending regular social security coverage to railroad employment. However, in view of the objections of the railroad sector to such coverage, both the original bill and the Committee-reported bill include extremely complex provisions which would establish a simulation of social security coverage of railroad employment. We objected to the provisions of H.R. 15301, as introduced, for accomplishing this proposed simulation of social security coverage in a way that would result in an unreasonable subordination of the

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Nation's basic social security system to the interests of a relatively small system for a particular industry. While the substitute provisions in H.R. 13301, as reported by the Committee, are less objectionable than those in the introduced bill, we believe they would give rise to many difficulties. Essentially, they would provide that in dual benefits cases the Social Security Administration would certify the amounts of social security benefits to the Railroad Retirement Board instead of paying them to the social security beneficiaries. The Railroad Retirement Board would include the benefits with the railroad retirement benefits they pay to the dual beneficiaries. The Social Security Administration would continue to compute and administer such social security benefits, with the very important exception noted above.

The difficulties we see in these dual benefit provisions from our study to date are indicated in the enclosed staff memorandum prepared by the Social Security Administration. At this point, we are by no means certain that other, and perhaps even more serious. problems will not be found in further analysis. Accordingly, we believe that the provisions should be modified so that the Social Security Administration would pay the social security benefits to the beneficiaries and transmit to the Railroad Retirement Board a listing of the amounts paid. If this modification is not acceptable, we believe that the present provisions for paying social security benefits in dual benefit cases should be left unchanged.

We are advised by the Office of Management and Budget that there is no objection to the presentation of this report from the standpoint of the Administration's program, and that enactment of H.R. 15301 would not be in accord with the program of the President. Sincerely,

Caspar W. Weinberger, Secretary. Enclosure 1

STAFF MEMORANDUM-SOCIAL SECURITY ADMINISTRATION

CONSIDERATIONS RELATING TO PROVISION IN H.R. 15301 REQUIRING THE

SOCIAL SECURITY ADMINISTRATION TO CERTIFY SOCIAL SECURITY BENEFITS TO THE RAILROAD RETIREMENT BOARD FOR PAYMENT

('nder H.R. 15301 as reported by the House Committee on Interstate and Foreign Commerce, the railroad retirement system would be restructured into a two-tier benefit system. The tier-one portion of the proposed benefit would consist of an amount calculated under the social security benefit formula applied to the employee's combined earnings in railroad employment and in work covered under social security and tier two would be a staff-retirement benefit consisting of an amount based on career railroad earnings. The tier-one benefit would be reduced by the amount of any social security benefit payable to the railroad annuitant on the basis of non railroad employment so that in the future railroad beneticiaries who qualify for both social security and railroad retirement benefits would no longer be able to receive benefits ( without regard to the staff-retirement component of the benefit) in excess of the amounts payable if railroad service were covered under social security.

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Under the bill, in the case of a person who has at least 120 months of railroad service (or who is the dependent of such a person) and who first becomes entitled to social security benefits after 1974, the Social Security Administration (SSA) would certify the amount of his social security benefit to the Railroad Retirement Board (RRB) (instead of to the Secretary of the Treasury, as under present law). The bill does not specify whether RRB would combine this amount with the railroad retirement benefit and pay both in a combined check or whether each benefit would be paid in a separate check; presumably this would be determined under RRM regulations.

While all the ramifications of certifying social security payments to RRB have not been fully explored, we have identified considerable problems which would arise under this approach.

In order for SSA to effectively administer the provisions of social security law it is vital that social security beneficiaries be kept informed of the amount of social security benefits to which they and their families are entitled and be reminded of the events which might result in a reduction, suspension, or termination of these benefits. SSA of course is in the best position to inform beneficiaries and to explain any adjustments made in the social security benefit checks. Under the bill, railroad retirement annuitants receiving social security benefits as part of their railroad retirement annuity checks would no doubt be confused as to which Federal agency should get their reports of events affecting their benefits. This would impair communication between SSA and beneficiaries and increase social security benefit overpayments. Also, if social security beneficiaries were not entitled to all or part of the social security benefit included in their railroad retirement checks but were entitled to the railroad retirement annuity part they would be naturally unwilling to return the whole check to RRB. This could also increase the incidence of overpayments for SSA.

There is no provision in the bill requiring RRB to inform its beneficiaries of the amount of any social security benefits their railroad retirement checks might include. As a result, many railroad retirement annuitants might believe they were not receiving some or all of the social security benefits to which they were entitled and. by taking their inquiries to social security district offices, could cause significant public relations problems and increase the workloads in the already overburdened district offices.

While certification of social security benefit amounts to RRB would create many administrative problems for SSA there would appear to be no counterbalancing advantages for RRB. (Confusion on the part of railroad annuitants as to what part of the roalroad retirement check represented social security benefits would undobutedly result in significant public relations problems for RRB as well as SSA. In most instances, RRB district offices could not explain any adjustments to the social security benefit included in a railroad retirement check and would have to refer the beneficiary to a social security district office. SSA could much more easily supply RRB with monthly listings of these social security benefits, rather than certifications of the benefit amounts for payment, so that RRB would have timely notice of the amounts by which to reduce the tier-one railroad retirement annuities. The only advantage to the railroad retirement system of the certifica

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tion proposal is that it would disguise the fact that railroad retirement benefits would actually be reduced by any social security benefits payable to the railroad retirement annuitant.

SSA is continuing to examine the provision to identify other sig. nificant administrative implications.

UNITED STATES OF AMERICA,
RAILROAD RETIREMENT BOARD,

Chicago, IV., August 8, 1974
Hon. HARRISON A. WILLIAMS, Jr.,
Chairman, Committee on Labor and Public Welfare, U.S. Senate,

Washington, D.C. DEAR MR. CHAIRMAN. This is the report of the Railroad Retirement Board on the bill S. 3612, which was introduced by Mr. Hathaway on June 10, 1974.

The bill consists of six titles, the first of which would amend the Railroad Retirement Act of 1937, in its entirety, and replace it with a new Railroad Retirement Act, the Railroad Retirement Act of 1974, which would become effective on January 1, 1975. The second title of the bill concerns persons who are receiving benefits under the present Railroad Retirement Act when the new Act would become effective and, generally speaking, provides for the conversion of the monthly benefits which they are receiving at that time to annuities under the new Act. Titles three, four, and five would amend the Social Security Act, the Railroad Unemployment Insurance Act, and the Internal Revenue Code of 1954, respectively, to take account of the changes made as a result of the enactment of title one. Finally, the sixth title of the bill would amend a provision of the present Railroad Retirement Act which would provide automatic increases in railroad retirement annuities if social security benefits are increased prior to January 1, 1975, and also would provide the effective dates of the amendments made by the other five titles of the bill.

BASIC CHANGES MADE BY THE PROPOSED RAILROAD RETIREMENT ACT

The major change which would be made by the proposed new Railroad Retirement Act concerns entitlement to dual benefits, that is, entitlement to benefits under both the Railroad Retirement Act and the Social Security Act on the basis of the earnings record of a single individual, U'nder present law, if an individual engages in employment covered under the Railroad Retirement Act and also engages in employment covered under the Social Security Act, he, and his spouse. can become entitled to benefits under both Acts, assuming, of course, that the individual has sufficient services under each Act to meet the basic requirements to benefit cligibility (10 years to service in the case of the Railroad Retirement Act and a specified number of quarters of coverage, which varies for different individuals, in the case of the Social Security Act). The bill would eliminate this possibility of dual benefit contitlement with respect to future service with the results that w spouses, like survivors under present law, would receive

nderenthe Railroad Retirement Act or the

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