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STATEMENT OF HARRY H. WARNER, SAVANNAH, GA.
Mr. WARNER. Mr. Chairman and gentlemen of the committee: My name is Harry H. Warner. I am employed as chief clerk in the engineering department of the Savannah & Atlanta Railway Co. at Savannah, Ga. On January 1, 1947, when our railroad retirement tax was increased 64 percent, most of us believed it necessary and that the benefits would be increased. However, shortly thereafter fellow employees called my attention to some of the glaring defects in the 1946 amendment which opened my eyes. I found that the estate which we thought we had created by paying into the retirement fund, had been confiscated without our knowledge or consent and the right to name our beneficiary abolished. Instead there is substituted a system of doles to our families, which sounds well enough until examined. But in order for a widow to receive any benefits she must be 65 years of age and a child must be under 18. Now the majority of employees survive until middle age and my own case is typical. My wife is 10 years younger, my children are grown and my parents have died. Therefore, regardless of the amount paid in, should I die before retirement no benefits would be payable unless I died penniless, in which case my funeral bill would be paid. Yet the Government collects on my salary $414 a year. In other words, 1 year's tax would discharge its obligation to me, except that if my wife survived me by 15 years, did not remarry, and did not earn more than $25 a month, in which case she would be entitled to a dole. No wonder the Government is now able to put a dollar in the so-called reserve fund for every dollar cost of benefits and operation. On the other hand, should I retire at 60 my pension would be two-thirds as much as a woman employee would receive, who pays the same tax, while I have a wife to support and the majority of women employees have no dependents. Since discovering these costly mistakes I have devoted my spare time to informing other employees about them and had intended submitting evidence of the almost universal dissatisfaction which has gradually developed as the truth became known. However, this now seems unnecessary, since the present plan has been deserted even by its author. I will say that I sent out several thousand circulars asking if there was anyone who was satisfied with the present law and if anyone could explain why it was written in the first place. No such letter was received but I received many letters from all parts of the country expressing resentment toward the law and commending my efforts to bring about a change. We do not understand why social-security tax is only 1 percent while ours will go to 6 percent January 1 and they receive almost as much benefits as we do. We do not understand why postal employees, who pay the same tax as we do, have a maximum of 80 percent of their salary as a pension while ours is 40 percent. A young man starting in the railroad service today, counting what he pays and what the railroad pays, plus 3 percent interest, will, in the 44 years he has to pay tax, accumulate a credit of 25 or 30 thousand dollars. Only those rare individuals who reach eighty or ninety will ever receive any such amount in benefits. Some will get nothing and leave nothing after a lifetime of taxation.
Last fall I heard about the National Railroad Pension Forum, Inc., and became a member. I am now urging the passage of bill H. R. 6397, introduced by the Honorable Joseph P. O'Hara, in common fairness to the employees who are paying this excessive tax. In the last 2 weeks I have circulated copies of this bill among hundreds of employees and all who have replied are highly pleased with it. No one has made any objections to it. It is noted that the Board reports benefit payments in 1947 increased 46 percent, yet the tax was increased 64 percent—just the reverse. The employees are concerned over the continued accumulation of credits on the books while pensioners and widows go on charity. I thank you for your kindness. The CHAIRMAN. We thank you for your appearance, Mr. Warner. Of course, you realize that the bill that was introduced yesterday does in some measure improve some of the conditions of which you have complained in your statement. Mr. WARNER. We had no opportunity to see the other bill, of course, until this morning. The CHAIRMAN. You are aware of what it contains? Mr. WARNER. I have seen it and so far as it goes, why, I am sure most employees approve of it. The CHAIRMAN. So far as it goes you approve of it? Mr. WARNER. Yes, sir. The CHAIRMAN. Any further questions, gentlemen? We thank you, Mr. Warner, for your appearance here today and for the testimony you have given to this committee. Mr. WARNER. Thank you. The CHAIRMAN. The next witness will be Mr. Herbert A. Haas, 601 Seventy-ninth Street, Brooklyn, N. Y.
STATEMENT OF HERBERT A. HAAS, BROOKLYN, N. Y.
Mr. HAAs. Mr. Chairman and gentlemen of the committee. The CHAIRMAN. About how much time do you think you will need, Mr. Haas? Mr. HAAs. I do not think I will take any more time than the other gentlemen have, Mr. Chairman. The CHAIRMAN. Thank you. The committee is very anxious to conclude the hearings and some of the members have intimated that they would like to have some lunch. Personally I want to hold an executive session as soon as the hearings are completed. Mr. HAAs. I feel the same, Mr. Chairman. Mr. Chairman and gentlemen of the committee: My name is Herbert A. Haas. I reside at 601 Seventy-ninth Street, Brooklyn, N. Y. I was employed by the Pennsylvania Railroad on February 24, 1942. On September 12, 1947, I was dropped from the rolls of the Pennsylvania Railroad by virtue of the management's application of regulation 3–C–1, properly defined as failure to exercise my seniori5. But during this hearing the question will undoubtedly be raised thankfully not as yet, as to my interest in being a registered lobbyist when I am no longer considered an employee of the railroad industry. In my personal opinion my case was poorly handled by the Pennsylvania Railroad. At the present time, I am compiling evidence that should prove I was ushered out of the service without fair trial of investigation of facts because of the complaints of officials of the Brotherhood of Railway and Steamship Clerks that I was employed in other activities. The activities referred to was my appointment as chairman of the employees committee for low-cost retirement benefits. All this is not too related to the testimony I am about to present, but the reason I have taken your valuable time to explain the situation, is to enable you to understand why I am in this fight. I intend to remain in it until the question of whether or not I am still an employee of the Pennsylvania Railroad is settled by a court of law. I might hesitate there, Mr. Chairman, and to save that question, later state that I realize that you learned gentlemen have gone into the very serious study on improvement of the railroad employees lot, improvement in their pension benefits, and if you have emerged with 6766, as the utmost, in benefits that you could give at this time, I am fully and wholeheartedly in favor of it and I know that the rail employees that I represent would feel the same way. But, however, I know you might wonder where we get all the money to do these things. In Mr. O'Hara's bill, 6397, it might be questioned that it is actuarially unsound. As to myself I do not profess to be an actuary. I have not had the opportunity for that type of study. I io, wish I had. But, in making a study of the Railroad Retirement Act as it is today and where there is a possibility for you gentlemen to again closet yourselves and find out where we might be able to find the money to give them retirement at 60 years of age, plus their pensions being based on the five highest years of earnings—now I realize I may be proven eventually wrong, but that is for you gentlemen to decide. ... I know that the study will be given, if I may introduce the following testimony. My appearance before you is strictly on behalf of the “rank and file” rail employees the Committee for Low Cost Retirement Benefits: represents. While I cannot give, by the customary method, the number we represent, I nevertheless can submit hundreds upon hundreds of letters proving the bitter resentment of rail employees toward the present Railroad Retirement Act. From these letters, received from rail employees both union and nonunion and covering almost every conceivable occupation, you will gather that upward : 500,000 rail employees are dissatisfied with their present pension plan. During the course of these hearings, testimony will be presented by Mr. Thomas Stack, president of the National Railroad Pension for. Inc., and other directors of the National Pension Forum. After meeting and having discussed the testimony they will present, I want to go on record as stating that my committee, its enlisted members, and myself, are fully in support of the program for the improvements that they seek. I will confine my testimony to that portion of the Crosser Act showing the extent of the liberal coverage that has resulted in the highest actuarial costs being placed upon the sincere employees who have selected railroad work as their life's occupation. At this time, I would like to stress the point to you gentlemen that the major portion of my remaining testimony is actual fact, not hearsay, and will consist mainly of direct quotes from the 1946 Annual Report of the Railroad Retirement Board. I am not prepared to provide each of you with a copy of the report. However, they are available to you through the United States Government Printing Office. To continue, I quote from page 52 of the previously mentioned report: By the end of 1944, a total of 6,067,000 individuals had acquired some compensation credits after 1936. Almost four-fifths of the total, comprised employees who had performed no service before 1937. In general, these employees are young workers in the junior and less skilled occupations. They j. large numbers of casual workers with no real attachment to the industry. Recent experience indicates, for example, that more than one-half of the new entrants withdraw from service in the year of entry. Track, shop, and station and platform laborers predominate among such withdrawals. To break the quote for a moment, I would like to make an important observation at this point. In actual pension taxes collected, relative to future coverage benefits, it will be good to remember that the major portion of the afore-mentioned groups. are in the low-wage category. I stress this so that you may understand how the present costs are related to the future liabilities of the Retirement Board. The direct quote continues: Employees with no prior service are concentrated in the short-service groups, three-fifths having performed service in only 1 year, one-fifth in 2 years, and one-tenth in 3 years. Suffice for that quote, but to prove that the old-timers and the new employees who decide to remain with the industry will eventually bear the cost of carrying these deadheads, I would like to make another quote from the bottom of page 53, which is from the same report: Among employees entering the industry after 1936, the annual withdrawal rate was eight to nine times the rate for employees with prior service. Up to this point it may not appear definitely clear that the railroad worker, who has chosen railroading as his life's occupation, is paying a high tax to support these short-term employees, who, in the majority of cases, left the railroad industry of their own free will. To further substantiate the thought I am attempting to convey, I will once again resort to a direct quote from the 1946 Annual Report of the Railroad Retirement Board. On page 77 you will find this direct passage: The present value of the liabilities—
Meaning of course, if all six-million-and-some-odd were to eventually collect the amounts credited to them— on the valuation date for employees and annuities is given as $7,709,400,000, exclusive of the new liabilities created under the act, as amended July 31, 1946. To cover this liability there were funds in hand of $474,700,000, leaving a balance of $7,234,700,000 to be covered by future annuitants. Now, gentlemen, as final evidence of conclusive proof that the }. exhorbitant rate of taxation is based upon the Retirement oard's income from the railroad employee presently connected in railroad occupation, I make a final quote from paragraph 3, page 77: In fixing the required rate of contribution the assumption has been made that each year contributions are required, first, to meet the normal accruing cost and second, to meet the interest accruing on the part of the unfunded liabilities not covered by future normal contributions. In attempting to summarize the foregoing, I would like to offer two suggestions for the elimination of the carry-overs, or as previously stated, the deadheads, from the Railroad Retirement Act
without anyone being the loser. My first suggestion would be the elimination of any future benefits to former employees of the railroad industry, their heirs or dependents, who have performed less than 5 years of continued or interrupted service. Turn over to the Social Security Administration a sum equal to the amount paid in by these ex-employees and their employers. This amount is not to be in excess of the amount of taxes that would have been deducted by the Social Security Administration had these ex-employees been employed in any industry other than the railroad industry. They could then receive proper credit for their period of employment commensurate with the credit benefits in effect by the Social Security Administration. If this were done, it is not unreasonable to assume that competent actuaries would find that the remainder of funds, proportionate with the number of employees, would be greatly in excess of the amount necessary to carry out the liabilities accrued to the accounts of the remainder of employees still listed as having credits under the Railroad Retirement Act. I repeat, while I am not an actuary, and a great many of you present will lay no claim to solving the intricate research involved in such work, I think you will admit that it is far from inconceivable to believe that an increase in benefit amounts should be given rail employees and could be given rail employees and entirely possible to reduce the amount of their personal taxation for such future pension at the same time. My second suggestion for improvement deals with, in the opinion of my constituents and myself, a very intelligent piece of recently enacted legislation by this very Congress. I refer to Public Law 426, Eightieth Congress, chapter 84, second session, H. R. 4127, approved #. 28, 1948. In H. R. 4127, created to amend the Civil §. Retirement Act of May 29, 1930, you have established a pay as you go plan for the civil service employees that is far superior, *. costly, gives greater personal and dependent benefits, and reduces the retirement age, in comparison to the coverage extended in the present Railroad Retirement Act. It is acknowledged, without criticism, that social insurance from first beginning was a guinea-pig intended for the best interests of the American worker. That legislative errors would be made was, in general, accepted. It does seem odd though, that the railroad industry as a whole, has consistently been made the guinea-pig in relation to the cost of social insurance. With the passage of H. R. 4127, honesty of intention cannot be questioned. Here was a progressive step forward in the future protection of the American worker. Not for a moment could the thought be harbored that the civil service employee was being given consideration that would be denied any other type of American worker in other than Government employ. Such being the case, I ask each of you, and any opponents who may be present, why, in the interests of the railroad employee and the railroad industry in general, legislation cannot be brought about that would give the rail worker a pension plan along the same fair lines as that enacted for the civil service employee by the passing of H. R. 4127. In conclusion, the committee I represent, its members and particularly myself, want to thank you for the time allowed us. I do not have to elaborate on the number of bills that have been proposed in connection with Railroad Retirement. Some of these bills can be directly attributed to the activities of the Employees Committee for