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until he reaches the age of 65, then he has got to quit that employment with the steel company if he wants to make a claim and be allowed a retirement allowance.
Now, that is an important feature, because the actuaries who have done a great deal of careful work on this bill believe that will overcome the additional expense which is brought about by making the change in regard to the requirement that he must be in the railroad service at the time he reaches eligibility.
So if you undertake to change one of those, you have thrown the whole machinery out of kelter, and I assure the committee that the plans set out in this bill have been carefully considered by the most expert men whose services could be obtained, and they have worked it out here in a way which they think will be entirely protective to the Treasury, but changes in the law which nobody doubts the power of Congress to make, I hope will be very carefully considered to see that they do not throw some other feature of the law out of kelter and make the machinery rattle instead of work smoothly.
Mr. BULWINKLE. In other words, there should not be so far as the committee is concerned, or Congress is concerned, there should not be any changes in any manner affecting the tax or the retirement features then?
Mr. FLETCHER. Well, I would not want to be so impudent as to suggest that to the committee.
Mr. BULWINKLE. You are just answering my question. Mr. FLETCHER. But I would like to say this: Maybe it would not be entirely wrong to suggest that before any changes are made the parties who understand all of this thoroughly should be given an opportunity to be heard.
Mr. BuLWINKLE. It is not my intention to make any changes along that line. I just wanted to bring out that fact.
Mr. FLETCHER. Now, on the question of cost which must concern this committee, although not officially, you will recall, and I may talk about the tax bill I suppose with impunity, unless my friends on the other side object-the bill originally provided for a basis of taxes which began at 5 percent of the pay roll, half and half, distributed half and half among the men and management, and it rose to the point where it became 7 percent at the end of a certain period.
Now, by reason of certain representations made by the Treasury Department, who doubted whether that would yield an amount of money necessary, those amounts have been increased to 512 percent to begin with, and by graduations to 71/2 percent, which I understand will yield something more than 7 percent on the average.
Now, those amounts of taxes, Mr. Chairman, are those to which the railroads have agreed. That is the thing that the average railroad president must carefully consider in connection with the question of his expense, just what is going to happen to him in the next 1, 2, or 3 years, along that line, and I certainly would feel grievously disappointed if any changes were made in the bill which made it necessary to change that tax rate, if that is what you mean, Major Bulwinkle.
Mr. BULWIN KLE. I mean, involving the tax or the benefits received.
Mr. FLETCHER. Oh, yes, sir. There is no suggestion I know of about the benefits being changed. That would require a resubmission of the whole matter to all of the boards of the railroad world, which
would mean delay and possibly failure to agree, and our hopes and expectations would not be fulfilled, those hopes being that this might pass through Congress as a result of this agreement, which I think realiy marks a departure in labor relations which some of us have some little pride in.
Mr. BULWIN KLE. It is not my intention to propose any amendments. I just wanted to clear that up.
Mr. FLETCHER. Unless there are some other questions which suggest themselves to the committee, I apologize for taking up so much of your time.
The ('HAIRMAN. Mr. Fletcher, this bill contemplates building up a reserve beginning with the first year?
Mr. FLETCHER. If you mean by that that we are going to collect more the first year than we are going to disburse the first year, yes; it will collect, of course, a great deal more the first year than they expect to disburse the first year, and so on. For many years that will follow.
The CHAIRMAN. That reserve, I understand you to say, will continue to accumulate for a good many years to come?
Mir. FLETCHER. There will be more money in the Treasury to the credit of this fund than is necessary to meet the obligations for possibly 20 years or more.
The CHARMAN. I presume that the actuaries have taken into consideration the possible effect of depressions in the future that would result in a reduced number of employees and therefore contributors.
Mr. FLETCHER. Yes; I think that has been given consideration. Of course, that is a matter which is on the knees of the gods and it may not be possible to make any very accurate determination of that l'act, but, generally speaking, those things have been taken into consideration.
The CHAIRMAN. Well, it is believed that this plan will take care of conditions that can be reasonably anticipated of that kind?
Mr. FLETCHER. It is hoped so, and it is believed so. Of course, it must be borne in mind that this scheme is always in the breast of the Congress. If situations develop which indicate that it is not working satisfactorily, it would be changed by additional legislation which would either increase the revenues or decrease the expenses.
The CHAIRMAN. We will have to assume, I take it, that that may be within the possibilities of the future.
Mr. FLETCHER. Of course, it is possible,
The CHAIRMAN. We may have to adjust it under different conditions, possibly.
Mr. FLETCHER. No one is here suggesting that it would be within their power or inclination to try to bind the action of subsequent Congresses, and, as Mr. Harrison said, and I confirm what he said, the understanding is here that the entire burden shall be borne by the industry in equal parts.
The CHAIRMAN. Thank you, Mr. Fletcher.
Mr. FLETCHER. I would like to ask Major Bulwinkle to look at this amendment which some of my friends have prepared, and see if it meets with his views.
Mr. KENNEY. Mr. Chairman
Mr. KENNEY. Mr. Fletcher, has the appeal been withdrawn in court where the old bill was brought in question?
Mr. FLETCHER. No. I might state that that case is not pending before the Supreme Court. It is pending before the Court of Appeals in the District of Columbia, and that appeal is on the docket of the court, and there has not been any activity connected with that, it having been by consent postponed awaiting the action of Congress on this measure.
Mr. KENNEY. There has been no stipulation to discontinue or dismiss it?
Mr. FLETCHER. Not yet; but there will be no difficulty in having that done.
Mr. KENNEY. I want to refer you to page 28 of the bill, containing the amendments suggested by Mr. Harrison. Section 19, short title. Section 19 reads: "This act may be cited as the 'Railroad Retirement Act of 1935.'"
That was referred to yesterday.
It strikes me that if we are going to use “1935", we ought to add the words “as amended” somehow to distinguish that act clearly and not confuse it.
Mr. FLETCHER. Of course, this is an amendment to the other law and we had supposed that the accurate designation of it would be the act of 1935, since this is an amendment to the 1935 act. I do not think that the matter is one of major importance from our point of view, I mean. I can see the point there. There possibly would be confusion in citations, and so on. We will be glad to consider that suggestion. If there is nothing else, Mr. Chairman
The CHAIRMAN. I believe that that is all.
STATEMENT OF CHARLES M. HAY, COUNSEL FOR COMMITTEE OF
RAILWAY LABOR EXECUTIVES
The CHAIRMAN. Mr. Hay, we will hear you. Mr. Hay. My name is Charles M. Hay, St. Louis, Mo. I am counsel for the committee which Mr. Harrison is chairman of.
I have but just a word, Mr. Chairman. Pursuant to the request of Mr. Boren the other day, who asked some questions about the status of men working for American railroads in Canada, I have prepared a statement which I submitted to Mr. Boren, who said it answered the question he had in mind, and with the permission of the committee, I should like to read this into the record at Mr. Boren's request.
Îhe CHAIRMAN. Very well.
Mr. Hay. The power to include persons, citizens of Canada, in the employ of an American road seems clear enough when the underlying powers upon which this legislation rests are considered, namely, the power to appropriate and spend money.
By this act Congress does not seek to regulate the conduct of an alien in a foreign country, but to grant him something based on and, in a sense, in consideration of the service he shall render to an
American carrier engaged in commerce among the several States and foreign countries. As he renders service to such carrier, he so far contributes to the general welfare as to afford a sound basis for the appropriation of money for his benefit.
Furthermore, grants of annuities based on such service may fairly be supported as an aid to interstate commerce through the aid which thus comes to the carrier. Throughout our history the Congress in one form or another has been making grants in aid of interstate commerce. They have been based upon the power to spend money for the common defense and the general welfare.
We do not limit soldiers' pensions to citizens or for service rendered within our own country. The only condition to the right of enjoyment is service, as in this case.
That is the statement to which I referred.
I think I need to take no further time, unless there are some questions by the members of the committee.
I happen to be in the fortunate situation of a counsel who has a client who has so admirably and effectively testified as to need no argument of counsel.
STATEMENT OF W. W. ROYSTER, PRESIDENT OF THE RAILROAD
EMPLOYEES' NATIONAL PENSION ASSOCIATION, CHICAGO, ILL.
The CHAIRMAN. Mr. Royster.
Mr. RoYSTER. Mr. Chairman, I have a short statement to make, which I would like to deliver without interruption if I may; but at its conclusion, I would be glad to yield to any questions.
The CHAIRMAN. Very well; without objection, you may proceed.
Mr. BULWINKLE. I thought if you had it, I might want to ask something afterward, and for that reason I can keep up with it.
Mr. ROYSTER. I am W. W. Royster, president of the Railroad Employees' National Pension Association, Chicago, Ill. I was chairman of the Minnesota State legislative board of the Brotherhood of Locomotive Engineers for 20 years, 1913–32; and chairman of the Four Brotherhoods State legislative board of Minnesota, comprising the Order of Railway Conductors, Brotherhood of Railroad Trainmen, Brotherhood of Locomotive Firemen and Enginemen, and the Brotherhood of Locomotive Engineers, for 16 years, 1915–31. I am a member of the Brotherhood of Locomotive Engineers and have been for more than 30 years and previously was a member of the Brotherhood of Locomotive Firemen. I do not appear here as a representative of any of the four brotherhoods.
During the first months of 1929, when I was an employee representative of the Brotherhood of Locomotive Engineers, I devised a plan of retirement pensions for railroad, express, and sleeping-car employees and submitted it to the four brotherhoods' State legislative board of Minnesota, which was approved by this board. This board in turn submitted it to the Railway Labor Executives' Association in March 1929 with the request that they seek a congressional enactment of same. We received a formal acknowledgment of our request, but no statement of what they would do about it. That was
the only communication I ever directly received from that body since 1929 to the present time. In the summer of 1929 I endeavored to get publicity in the four brotherhoods' journals for the pension plan. The editors of the Order of Railway Conductors, the Brotherhood of Locomotive Firemen and Enginemen, and the Brotherhood of Locomotive Engineers journals were much interested and said it would be published in the next issue of their journals. Later, two of the editors wrote me that they would be unable to publish the plan for the reason that the Railway Labor Executives' Association was considering a plan, and if they should publish our plan it would give it undue publicity over and above the plan under consideration. Mind you, this was the summer of 1929. În October 1929 the Order of Railway Conductors' Journal published the plan in full. During the summer of 1931 the Railway Labor Executives' Association went on record in favor of State old-age pensions for citizens, which, of course, was intended to cover railroad employees, and which plan at that time would require a pauper's oath in order to become beneficiary.
In December 1930, upon my call, a convention of railroad employees met at the Great Northern Hotel in Chicago and organized the Railroad Employees' National Pension Association and honored me with its headship. I was instructed to seek the cooperation of the Railway Labor Executives' Association or to turn the matter over to them if they would pursue the objective. I addressed a communication to them but received no reply. In October 1931, I again addressed a letter to D. B. Robinson, who was at this time chairman of the Railway Labor Executives' Association, copies going to each of the other 20 executives, inviting him to address our November convention on retirement pension and in the event of his inability to attend, requested him to name a substitute to speak for him on that occasion. I am sorry indeed to mention that I received no response from any one of them.
From that time on, gentlemen of the committee, we have carried on the work of building sentiment for retirement pensions among railway employees, Members of Congress, and public-spirited men. Our legislation was introduced in the Senate and House in February and March 1932 by Senator Brookhart and Congressman Keller, respeetively. Our labor executives prevailed upon Senator Brookhart to withdraw the bill, much to our embarrassment. Later we succeeded in securing the sponsorship of Senator Hatfield in the Senate. In the meantime our labor executives secured the services of an actuary who devised a plan which was introduced in both House and Senate. This plan became known as the insurance plan, because it would require a working fund of more than 4 billions of dollars.
Its tax on the employees, according to age, and on the carriers, ranged from 312 to 61/2 percent. If an employee was not in service and wished to continue the running of his service period, his tax would range from 7 to 13 percent. It was an awkward and impracticable plan and was abandoned in the Senate committee in 1934, when the plan now in the present law was adopted. I wish to say here and now that the present plan of the Railroad Retirement Act is an embodiment of the features of the plan that we submitted to the labor executives in 1929.