will take the 4-percent proviso. The thing has very little value for the men who are now working on the railroads for this reason: If a man is getting $2,400 a year, let us say, in 10 years all he will have is $24,000 total compensation and taking 4 percent of that would only be $960, so that a man getting less than $2,400 a year would have to work 20, 25, or 30 years for that to have any particular value to him.

The proviso as to the irrevocable feature is one we wish particularly to emphasize, because a man at the time of making the election, we will say, as to the surviving spouse to receive the annuity, may be in the best of health at that time, never anticipate anything else. and he may later be broken in body and mind, in a short time.

This irrevocable feature, of course, makes it impossible for him to do anything in that connection after he once elects or fails to elect.

With reference to pushing out the older men, putting them on pension, we believe that that is a fine thing and the question has been raised as to whether the younger men will not protest against that. Going over some of the former hearings, I find the sentiment to be quite the contrary. The young men are glad to have the older men retire on a fair pension, and are willing to carry their part of the burden if it might give them an incentive, an inducement to retire even though it might mean that they have to pay more, because that means that, within the meaning of the act, new jobs and new opportunities will be created for them, and new opportunities for promotion.

Congressman Martin, I believe, introduced or put in that amendment with reference to the one-fifteenth penalty for those remaining after the age of 65 years in order to encourage them to retire at that time.

Mr. MARTIN. Pardon me right there. No; I did not introduce that, but I favored it. I thought that it ought to be made one-tenth, to enforce retirement at the pensionable age and provide employment for younger men on the list.

Mr. MCALLISTER. Yes.

Mr. MARTIN. In order to speed up retirements.

Mr. MCALLISTER. So that has been before the committee before. Now, our position briefly summarized is this: We believe the present act to be superior to the act, as amended. It offers more to the employees than the amended act does. It gives them greater benefits.

Now, against this, I know that it will be urged here that a bargain has been struck with the executives of the class I railroads that they will not contest the act.

In return for that bargain, the present act has been emasculated, to our way of thinking, and too much has been paid for that bargain from the side of the employees.

There is a chance that there will be a challenge as to the constitutionality of the taxing act as at present written. There is no challenge as against the constitutionality of this act, of this Railroad Retirement Act, and so far as the bargain is concerned, as I pointed out before, it is not worth very much, the fact that the class I railroads will not challenge it, does not mean that it cannot be challenged and that its constitutionality cannot be challenged from

three or four other sources, and undoubtedly it will. We in our organization are not afraid of that. We believe that the act will stand. We have confidence that it will stand.

Now, with reference to the other points, that is with reference to the adding of the gratuity pensions, and the adding of the railroad organization employees: We are in favor of that. We believe that is a good thing. They have been enumerated. Mr. Royster enumerated the good points in that act, which we stand for.

As to the other points, we criticize, they are all set forth in detail in his statement, and I believe that summarizes our position.

Now, there is just one thing, one other point that I wish to bring before the committee, and that is the question of the gratuity action. We do not feel that it is just or fair to take the gratuity pensioners who are on the pay rolls of the railroads today and to shut out those old employees who are not.

I have before me the testimony given before the United States Senate committee in April 1934, on one of the prior bills and in that hearing Dr. Lorenz, who was the actuary for the Interstate Commerce Commission, testified at the hearing as to the age of the railroad employees, and in that testimony in 1934 he testified that 90.6 percent of the employees on the railroads were under some sort of a pension or retirement system, some sort or other, leaving only 9.4 percent who were not in 1934, and I do not doubt but what those figures are approximately correct today.

In his testimony he further quotes that of the men over 70-and practically all of these old pensioners are over 70-that there are in number some 3,500 or 4,000 only. Now, we say that we ought to take those men in, that scattering few, and that they will suffer grievously if they are not taken in, because of their unfortunate choice of railroads, which they could not anticipate, when they went to work, whether there would be a pension system or not. To me, to leave them out, would be a grave injustice, and the burden of taking them in would indeed be a small one, in the million or over railroad employees who pay for this act.

Mr. MARTIN. Pardon me. Is that the estimate of the number that are entirely left out?

Mr. MCALLISTER. That is.

Mr. MARTIN. Who are not working?

Mr. MCALLISTER. No; Mr. Martin. That is the number of employees who are working. He states here that the number of men who are actually employed is estimated at about 3.500 to 4,000. That does not include the men who would be retired, but it is a small factor in determining the question of the million or more railroad. employees who would come under the benefits of this act.

Mr. MARTIN. What kind of an amendment would it take to take care of that?

Mr. MCALLISTER. I have one which I wish to suggest to the committee. I can hand it up if the committee desires, or I can read it. Mr. BULWINKLE. You had better hand it up. You have only got 2 or 3 more minutes.

Mr. MCALLISTER. It just simply amends section 6, page 16, line 4, following the colon after the word "employer", as follows:

Provided further, That each person who has been retired by an employer by reason of his employment and who has attained seventy years of age or over,

whether or not such employer maintained a gratuity pension board or association and paying pensions to its retired employees, shall be eligible for a pension beginning July 1, 1937, and thereafter upon making application for same. No pension shall begin to accrue prior to July 1, 1937, or more than sixty days prior to the date received by the Board of any application made thereafter. The amount of such pension shall be determined (1) by taking the average of the monthly compensation earned by an employee in calendar months included in his years of service in the years 1924-1931, and (2) where the service in the period 1924-1931 is insufficient to constitute a fair and equitable basis for determining the monthly compensation, the Board may determine the monthly compensation for such service in such manner as in its judgment shall be equitable. One per centum of such averaged wage, multiplied by the number of years of service shall be the amount of the monthly pension payments. No earnings in excess of $300 for any one month shall be considered in determining the monthly compensation.

Mr. MARTIN. That applies in the case where employees are retired prior to the enactment date?

Mr. MCALLISTER. It would apply to any employee who made an application, who had been retired at any time, arising out of his employment.

Mr. MARTIN. That would apply prior to the enactment date?
Mr. MCALLISTER. Prior as well as afterwards.

Mr. MARTIN. You think that that would meet the objection raised in the courts on the original act?

Mr. MCALLISTER. I think that that is true, Congressman; but I really think, as a lawyer, that the Supreme Court's decision on the 15 points in which it invalidated the prior act is so drastic and farreaching that when confronted with the same situation as they were in the Adkins case and in the recent minimum-wage law, I think they will reverse themselves on that. There was a 5-to-4 decision.

Mr. MARTIN. I know that there was a 5-to-4 decision, and a very able dissenting opinion rendered by Chief Justice Hughes.

Mr. MCALLISTER. Of course, they claim that we are reaching back to do that, but we are reaching back with this act and taking in the gratuity pensioners.

That whole chapter, as I said at the outset, may have some danger in it if that decision were allowed to stand and it were to be followed. The adopting of all of the gratuity pensions is open to that objection as the act is now amended.

So, I say, if we are going to have 90 percent of those old superannuated employees in, why not bring them all in?

I thank the committee for your attention.

STATEMENT OF HERMAN L. EKERN, MADISON, WIS.

Mr. BULWINKLE. We will hear you, Mr. Ekern. How much time do you want?

Mr. EKERN. I think that I can get through in half to three-quarters of an hour.

Mr. BULWINKLE. What?

Mr. EKERN. I think I can get through in a half to three-quarters of an hour.

Mr. BULWINKLE. That is too much; too much.

Mr. EKERN. I will try to make it as brief as possible, Mr. Chairman. Mr. BULWINKLE. All right. We will go ahead a while, but we are trying to get this hearing over with, and we want to have an executive

session tomorrow morning and get the bill out, and we have two other witnesses who are to follow you.

I understood you to tell me that you wanted 10 or 15 minutes.
Mr. EKERN. There must be some mistake about that.

Mr. BULWINKLE. All right; go ahead.

Mr. EKERN. I appear in my own behalf and in the interest of employees who are affected by this proposed amendment.

Mr. WOLVERTON. Who did you say you represent?

Mr. EKERN. I appear in my own behalf.

Mr. WOLVERTON. Are you an employee?

Mr. EKERN. No.

Mr. WOLVERTON. What do you mean when you say you appear in your own behalf?

Mr. EKERN. I served in all of the previous hearings on this bill in connection with employees, and I drafted the original bill that was introduced here in 1932, and I have participated in every hearing since. I have worked on this continuously.

Mr. PETTENGILL. Will you speak a little louder? We cannot hear you on account of the noise outside.

Mr. WOLVERTON. It is my recollection that you and Mr. Royster appeared here together at former times.

Mr. EKERN. I was formerly employed by the Railroad Employees' National Pension Association, and I drafted the original bill while in the employment of that association; and I have followed the legislation through the succeeding stages-proceedings before the different committees.

Mr. BULWINKLE. Are you agreeing with Mr. Royster's position now on this bill?

Mr. EKERN. I do not. I do not appear for any association. I have not been in the employ of any association since 1935.

Mr. BULWINKLE. And you are appearing here strictly on your own responsibility as a citizen?

Mr. EKERN. I am appearing here in my own behalf as a citizen, and without any retainer or as a representative of any organization or for anybody.

Mr. BULWINKLE. You are appearing here without representing any organization or anyone except yourself?

Mr. EKERN. That is correct.

Mr. HALLECK. Mr. Chairman

Mr. WOLVERTON. I was just about to suggest, Mr. Chairman, since our time is so short and there are others here representing organizations of employees who are vitally interested, it would seem to me that the time ought to be utilized for their benefit.

While I appreciate this gentleman has knowledge of the subject which will be helpful, yet I think we should first hear from those who are representing organizations.

Mr. BULWINKLE. That is what I wanted to bring out. That is the reason that I brought that out, because the chairman asked me in his note to close the hearing today.

Now, Mr. Latimer, representing the Retirement Board, is to appear, as is also Mr. Hay, the attorney for Mr. Harrison's committee.

Now, that is the reason that I think the committee will agree with me that Mr. Lea has given you sufficient time when he let you have 10 minutes this morning.

Mr. EKERN. Well, I shall accommodate myself to the wishes of the committee.

Mr. BULWINKLE. And you may file any statement you wish for the record.

Mr. EKERN. Yes.

(The statement referred to is as follows:)

The bill makes changes which improve the present law.

1. It adds railroad associations and their employees and certain labor representatives not heretofore included.

2. The definition of employment relation is broadened by adding those on leave of absence without a requirement of being able and willing to serve, and by adding those absent on account of sickness or disability.

3. It adds an annuity for disability between ages 60 and 65 without requiring 30 years of service.

4. An annuity may be computed after 1966 on more than 30 years of service. 5. A minimum annuity is provided for one who is in service at age 65 and has had an average wage of $50 or less for 20 years or more.

6. Upon the death of an employee a death benefit is provided equal to 4 percent on the total compensation, less the sum of the annuity payments received. If a surviving spouse is receiving a part of the employee's annuity, the death benefit is payable on her death less the additional annuity payments received by her. The death benefit under the present law of one-half of the employee annuity for 1 year is greater for a little more than 6 years and is always paid without reduction for any previous annuity payments.

7. The provision for restoring the company pensions to the amounts promised before 1930 is splendid. It seems, however, to be payable only when it can be done out of the United States Treasury.

The bill as introduced takes away rights of the employee under the present law and contains additions which as proposed in the bill are subject to serious objection.

1. The bill would subject every present employee to the possible loss of the part of his annuity which would be calculated on his prior service, that is, service before August 29, 1935, the enactment date of the present law. This is proposed to be done by a requirement that the employee must be in service. which as I use it, includes the employment relation on the day he becomes eligible to receive an annuity. If not, only the service beginning after December 31, 1936, is recognized in computing his annuity. Mr. Harrison for the Committee of Railway Labor Executives, has offered an amendment accepted by the railroads which removes this objection.

2. The bill deprives every person who is reemployed after August 29, 1935, of any credit for service before that date in computing the amount of his annuity unless he was in service on that particular day. This provision is still in the bill. It is sure to affect a large part of those who may be reemployed out of more than 500,000 employees thrown out of the service mainly by the depression. This hits particularly very large groups in maintenance-of-way and the lower-paid services.

3. The bill reduces the annuity on retirement at age 65 or even at age 60 for any annuity payments on account of disability. This hits the unfortunate, disabled employee, least able to bear it. It is a proposal which has no precedent in the present law or other practice.

4. It proposes to reduce the disability annuity granted upon less than 30 years of service at age 60 by one-fifteenth for each year the employee is younger than age 65. This should not be done. The annuity is already based on fewer years of service and in any event can only run as provided for all disability annuities to age 65.

5. The bill would wipe out section 2 of the present law, reducing the annuity by one-fifteenth for each year the employee continues in service after age 70 or during any year after 65, without filing a written agreement as required by that section. The effect is to encourage the older employees to continue in old age while able to get more in wages than in an annuity. This is opposed to the principle of retirement annuity system. This provision was inserted by this committee on its own motion in the present act.

6. The bill would have the United States Treasury take over present $35,000,000 annual pension payments under the carrier-company plan, of which they now pay the whole cost. The proposal would include all kinds of disability