[House Report 106-777]
[From the U.S. Government Publishing Office]
106th Congress Rept. 106-777
HOUSE OF REPRESENTATIVES
2d Session Part 1
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RAILROAD RETIREMENT AND SURVIVORS' IMPROVEMENT ACT OF 2000
_______
July 20, 2000.--Ordered to be printed
_______
Mr. Shuster, from the Committee on Transportation and Infrastructure,
submitted the following
R E P O R T
[To accompany H.R. 4844]
The Committee on Transportation and Infrastructure, to whom
was referred the bill (H.R. 4844) to modernize the financing of
the railroad retirement system and to provide enhanced benefits
to employees and beneficiaries, having considered the same,
report favorably thereon with an amendment and recommend that
the bill as amended do pass.
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Railroad Retirement
and Survivors' Improvement Act of 2000''.
(b) Table of Contents.--
Sec. 1. Short title; table of contents.
TITLE I--AMENDMENTS TO RAILROAD RETIREMENT ACT OF 1974
Sec. 101. Expansion of widow's and widower's benefits.
Sec. 102. Retirement age restoration.
Sec. 103. Vesting requirement.
Sec. 104. Repeal of railroad retirement maximum.
Sec. 105. Investment of railroad retirement assets.
Sec. 106. Elimination of supplemental annuity account.
Sec. 107. Transfer authority revisions.
Sec. 108. Annual ratio projections and certifications by the Railroad
Retirement Board.
TITLE II--AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986
Sec. 201. Amendments to the Internal Revenue Code of 1986.
Sec. 202. Exemption from tax for Railroad Retirement Investment Trust.
Sec. 203. Repeal of supplemental annuity tax.
Sec. 204. Employer, employee representative, and employee tier 2 tax
rate adjustments.
TITLE I--AMENDMENTS TO RAILROAD RETIREMENT ACT OF 1974
SEC. 101. EXPANSION OF WIDOW'S AND WIDOWER'S BENEFITS.
(a) In General.--Section 4(g) of the Railroad Retirement Act of 1974
is amended by adding at the end the following new subdivision:
``(10)(i) If for any month the unreduced annuity provided under this
section for a widow or widower is less than the widow's or widower's
initial minimum amount computed pursuant to paragraph (ii) of this
subdivision, the unreduced annuity shall be increased to that initial
minimum amount. For the purposes of this subdivision, the unreduced
annuity is the annuity without regard to any deduction on account of
work, without regard to any reduction for entitlement to an annuity
under section 2(a)(1) of this Act, without regard to any reduction for
entitlement to a benefit under title II of the Social Security Act, and
without regard to any reduction for entitlement to a public service
pension pursuant to sections 202(e)(7), 202(f)(2), or section 202(g)(4)
of the Social Security Act.
``(ii) For the purposes of this subdivision, the widow or widower's
initial minimum amount is the amount of the unreduced annuity computed
at the time an annuity is awarded to that widow or widower, except
that--
``(A) in subsection (g)(1)(i) `100 per centum' shall be
substituted for `50 per centum'; and
``(B) in subsection (g)(2)(ii) `130 per centum' shall be
substituted for `80 per centum' both places it appears.
``(iii) If a widow or widower who was previously entitled to a
widow's or widower's annuity under section 2(d)(1)(ii) of this Act
becomes entitled to a widow's or widower's annuity under section
2(d)(1)(i) of this Act, a new initial minimum amount shall be computed
at the time of award of the widow's or widower's annuity under section
2(d)(1)(i) of this Act.''.
(b) Effective Date.--
(1) Generally.--The amendment made by this section shall take
effect January 1, 2001 and shall apply to annuity amounts
accruing for months after December 2000 in the case of
annuities awarded on or after that date and in the case of
annuities awarded before that date if the annuity amount under
section 4(g) of the Railroad Retirement Act was computed under
section 4(g), as amended by Public Law 97-35.
(2) Special rule for annuities awarded before january 1,
2001.--In applying the amendments made by this section to
annuities awarded before January 1, 2001, the calculation of
the initial minimum amount under new section 4(g)(10)(ii) of
the Act shall be made as of the date of award of the widow's or
widower's annuity.
SEC. 102. RETIREMENT AGE RESTORATION.
(a) Employee Annuities.--Section 3(a)(2) of the Railroad Retirement
Act of 1974 is amended by inserting after ``(2)'' the following: ``For
purposes of this subsection, individuals entitled to an annuity under
section 2(a)(1)(ii) of this Act shall, except for the purposes of
recomputations in accordance with section 215(f) of the Social Security
Act, be deemed to have attained retirement age (as defined by section
216(l) of the Social Security Act).''.
(b) Spouse and Survivor Annuities.--Section 4(a)(2) of the Railroad
Retirement Act of 1974 is amended by striking ``if an'' and all that
follows through ``section 2(c)(1) of this Act'' and inserting ``a
spouse entitled to an annuity under section 2(c)(1)(ii)(B) of this
Act''.
(c) Conforming Repeals.--Sections 3(a)(3), 4(a)(3), and 4(a)(4) of
the Railroad Retirement Act are repealed.
(d) Effective Dates.--
(1) Generally.--Except as provided in paragraph (2), the
amendments made by this section shall apply to annuities that
begin to accrue on or after January 1, 2001.
(2) Exception.--The amount of the annuity provided for a
spouse under section 4(a) shall be computed under section
4(a)(3), as in effect before the date of the enactment of this
section, if the annuity amount provided under section3(a) for
the individual on whose employment record the spouse annuity is based
was computed under section 3(a)(3), as in effect before the date of the
enactment of this section.
SEC. 103. VESTING REQUIREMENT.
(a) Certain Annuities for Individuals.--Section 2(a) of the Railroad
Retirement Act of 1974 is amended--
(1) by inserting in subdivision (1) ``or, for purposes of
paragraphs (i), (iii), and (v), five years of service, all of
which accrues after December 31, 1995,'' after ``ten years of
service'', and
(2) by adding at the end the following:
``(4) An individual who is entitled to an annuity under paragraph (v)
of subdivision (1), but who does not have at least ten years of
service, shall, prior to the month in which the individual attains age
62, be entitled only to an annuity amount computed under section 3(a)
of this Act (without regard to section 3(a)(2) of this Act) or section
3(f)(3) of this Act. Upon attainment of age 62, such an individual may
also be entitled to an annuity amount computed under section 3(b), but
such annuity amount shall be reduced for early retirement in the same
manner as if the individual were entitled to an annuity under section
2(a)(1)(iii).''.
(b) Computation Rule for Individuals' Annuities.--Section 3(a) of the
Railroad Retirement Act of 1974, as amended by section 102 of this Act,
is furtheramended by adding at the end the following new subdivision:
``(3) If an individual entitled to an annuity under section
2(a)(1)(i) or (iii) of this Act on the basis of less than ten years of
service is entitled to a benefit under section 202(a), section 202(b),
or section 202(c) of the Social Security Act which began to accrue
before the annuity under section 2(a)(1)(i) or (iii) of this Act, the
annuity amount provided such individual under this subsection, shall be
computed as though the annuity under this Act began to accrue on the
later of (A) the date on which the benefit under section 202(a),
section 202(b), or section 202(c) of the Social Security Act began or
(B) the date on which the individual first met the conditions for
entitlement to an age reduced annuity under this Act other than the
conditions set forth in sections 2(e)(1) and 2(e)(2) of this Act and
the requirement that an application be filed.''.
(c) Survivors' Annuities.--Section 2(d)(1) of the Railroad Retirement
Act of 1974 is amended by inserting ``or five years of service, all of
which accrues after December 31, 1995,'' after ``ten years of
service''.
(d) Limitation on Annuity Amounts.--Section 2 of the Railroad
Retirement Act of 1974 is amended by adding at the end the following:
``(i) An individual entitled to an annuity under this section who has
completed five years of service, all of which accrues after 1995, but
who has not completed ten years of service, and the spouse, divorced
spouse, and survivors of such individual, shall not be entitled to an
annuity amount provided under section 3(a), section 4(a), or section
4(f) of this Act unless the individual, or the individual's spouse,
divorced spouse, or survivors, would be entitled to a benefit under the
Social Security Act on the basis of the individual's employment record
under both the Railroad Retirement Act and the Social Security Act.''.
(e) Computation Rule for Spouses' Annuities.--Section 4(a) of the
Railroad Retirement Act of 1974, as amended by section 102 of this Act,
is further amended by adding at the end the following new subdivision:
``(3) If a spouse entitled to an annuity under section
2(c)(1)(ii)(A), section 2(c)(1)(ii)(C), or section 2(c)(2) of this Act
or a divorced spouse entitled to an annuity under section 2(c)(4) of
this Act on the basis of the employment record of an employee who will
have completed less than 10 years of service is entitled to a benefit
under section 202(a), section 202(b), or section 202(c) of the Social
Security Act which began to accrue before the annuity under section
2(c)(1)(ii)(A), section 2(c)(1)(ii)(C), section 2(c)(2), or section
2(c)(4) of this Act, the annuity amount provided under this subsection
shall be computed as though the annuity under this Act began to accrue
on the later of (A) the date on which the benefit under section 202(a),
section 202(b), or section 202(c) of the Social Security Act began or
(B) the first date on which the annuitant met the conditions for
entitlement to an age reduced annuity under this Act other than the
conditions set forth in sections 2(e)(1) and 2(e)(2) of this Act and
the requirement that an application be filed.''.
(f) Application Deeming Provision.--Section 5(b) of the Railroad
Retirement Act of 1974 is amended by striking the second sentence and
inserting the following: ``An application filed with the Board for an
employee annuity, spouse annuity, or divorced spouse annuity on the
basis of the employment record of an employee who will have completed
less than ten years of service shall be deemed to be an application for
any benefit to which such applicant may be entitled under this Act or
section 202(a), section 202(b), or section 202(c) of the Social
Security Act. An application filed with the Board for an annuity on the
basis of the employment record of an employee who will have completed
ten years of service shall, unless the applicant specified otherwise,
be deemed to be an application for any benefit to which such applicant
may be entitled under this Act or title II of the Social Security
Act.''.
(g) Crediting Service Under the Social Security Act.--Section 18(2)
of the Railroad Retirement Act of 1974 is amended--
(1) by inserting ``or less than five years of service, all of
which accrues after December 31, 1995,'' after ``ten years of
service'' every place it occurs; and
(2) by inserting ``or five or more years of service, all of
which accrues after December 31, 1995,'' after ``ten or more
years of service''.
(h) Automatic Benefit Eligibility Adjustments.--Section 19 of the
Railroad Retirement Act of 1974 is amended--
(1) by inserting ``or five or more years of service, all of
which accrues after December 31, 1995,'' after ``ten years of
service'' in subsection (c); and
(2) by inserting ``or five or more years of service, all of
which accrues after December 31, 1995,'' after ``ten years of
service'' in subsection (d)(2).
(i) Conforming Amendments.--
(1) Section 6(e)(1) of the Railroad Retirement Act of 1974 is
amended by inserting ``or five or more years of service, all of
which accrues after December 31, 1995,'' after ``ten years of
service''.
(2) Section 7(b)(2) of the Railroad Retirement Act of 1974 is
amended by inserting ``or five or more years of service, all of
which accrues after December 31, 1995,'' after ``ten years of
service''.
(3) Section 205(i) of the Social Security Act is amended by
inserting ``or five or more years of service, all of which
accrues after December 31, 1995,'' after ``ten years of
service''.
(j) Effective Date.--The amendments made by this section shall take
effect January 1, 2001.
SEC. 104. REPEAL OF RAILROAD RETIREMENT MAXIMUM.
(a) Employee Annuities.--Section 3(f) of the Railroad Retirement Act
of 1974 is amended by striking paragraph (1).
(b) Spouse and Survivor Annuities.--Section 4 of the Railroad
Retirement Act of 1974 is amended by striking subsection (c).
(c) Effective Date.--The amendments made by this section shall be
effective January 1, 2001, and shall apply to annuity amounts accruing
for months after December 2000.
SEC. 105. INVESTMENT OF RAILROAD RETIREMENT ASSETS.
(a) Establishment of Railroad Retirement Investment Trust.--Section
15 of the Railroad Retirement Act of 1974 is amended by inserting after
subsection (i) the following:
``(j) Railroad Retirement Investment Trust.--
``(1) Establishment.--The Railroad Retirement Investment
Trust (hereinafter in this subsection referred to as the
`Trust') is hereby established. The Trust shall manage and
invest the assets of the Railroad Retirement Trust Fund
(hereinafter in this section referred to as the ``Fund'', which
is hereby established as a trust organized in the District of
Columbia and shall, to the extent not inconsistent with this
Act, be subject to the laws of the District of Columbia
applicable to such trusts.
``(2) Not a federal agency or instrumentality.--The Trust is
not a department, agency, or instrumentality of the Government
of the United States and shall not be subject to title 31,
United States Code.
``(3) Board of trustees.--
``(A) Generally.--The Trust shall have a Board of
Trustees, consisting of 7 members, each appointed by a
unanimous vote of the Railroad Retirement Board. The
Railroad Retirement Board may remove any member so
appointed by unanimous vote. Of the 7 members, 3 shall
represent the interests of labor, 3 shall represent the
interests of management, and 1 shall represent the
interests of the general public. The members of the
Board of Trustees shall not be considered officers or
employees of the Government of the United States.
``(B) Qualifications.--Members of the Board of
Trustees shall be appointed only from among persons who
have experience and expertise in the management of
financial investments and pension plans. No member of
the Railroad Retirement Board shall be eligible to be a
member of the Board of Trustees.
``(C) Terms.--Except as provided in this
subparagraph, each member shall be appointed for a 3-
year term. The initial members appointed under this
paragraph shall be divided into 3 equal groups so
nearly as may be, of which one group will be appointed
for a 1-year term, one for a 2-year term, and one for a
3-year term. A vacancy in the Board of Trustees shall
not affect the powers of the Board of Trustees and
shall be filled in the same manner as the selection of
the member whose departure caused the vacancy. Upon the
expiration of a term of a member of the Board of
Trustees, that member shall continue to serve until a
successor is appointed.
``(4) Powers of the board of trustees.--The Board of Trustees
shall--
``(A) retain independent advisers to assist it in the
formulation and adoption of its investment guidelines;
``(B) retain independent investment managers to
invest the assets of the Fund in a manner consistent
with such investment guidelines;
``(C) invest assets in the Fund, pursuant to the
policies adopted in subparagraph (A);
``(D) pay administrative expenses of the Fund and the
Trust from the money in the Fund; and
``(E) transfer money to the disbursing agent to pay
benefits payable under this Act from money in the Fund
and administrative expenses related to those benefits.
``(5) Reporting requirements and fiduciary standards.--The
following reporting requirements and fiduciary standards shall
apply with respect to the Railroad Retirement Trust and the
Railroad Retirement Trust Fund (and the assets held in such
Trust Fund):
``(A) Duties of the board of trustees.--The Railroad
Retirement Trust and each member of the Board of
Trustees shall discharge their duties with respect to
the assets of the Fund solely in the interest of the
Railroad Retirement Board and through it, the
participants and beneficiaries of the programs funded
under this Act--
``(i) for the exclusive purpose of--
``(I) providing benefits to
participants and their beneficiaries;
and
``(II) defraying reasonable expenses
of administering the functions of the
Trust;
``(ii) with the care, skill, prudence, and
diligence under the circumstances then
prevailing that a prudent person acting in a
like capacity and familiar with such matters
would use in the conduct of an enterprise of a
like character and with like aims;
``(iii) by diversifying investments so as to
minimize the risk of large losses, unless under
the circumstances it is clearly prudent not to
do so; and
``(iv) in accordance with Trust governing
documents and instruments insofar as such
documents and instruments are consistent with
this Act.
``(B) Prohibitions with respect to members of the
board of trustees.--No member of the Board of Trustees
shall--
``(i) deal with the assets of the Fund in the
trustee's own interest or for the trustee's own
account;
``(ii) in an individual or in any other
capacity act in any transaction involving the
assets of the Fund on behalf of a party (or
represent a party) whose interests are adverse
to the interests of the Trust, the Fund, the
Railroad Retirement Board, or the interests of
participants or beneficiaries; or
``(iii) receive any consideration for the
trustee's own personal account from any party
dealing with the assets of the Fund.
``(C) Exculpatory provisions and insurance.--Any
provision in an agreement or instrument that purports
to relieve a trustee from responsibility or liability
for any responsibility, obligation or duty under this
Act shall be void: Provided, however, That nothing
shall preclude--
``(i) the Trust from purchasing insurance for
its trustees or for itself to cover liability
or losses occurring by reason of the act or
omission of a trustee, if such insurance
permits recourse by the insurer against the
trustee in the case of a breach of a fiduciary
obligation by such trustee;
``(ii) a trustee from purchasing insurance to
cover liability under this section from and for
his own account; or
``(iii) an employer or an employee
organization from purchasing insurance to cover
potential liability of one or more trustees
with respect to their fiduciary
responsibilities, obligations, and duties under
this section.
``(D) Bonding.--Every trustee and every person who
handles funds or other property of the Fund (hereafter
in this subsection referredto as `Trust official')
shall be bonded in accordance with the following:
``(i) The amount of such bond shall be fixed
at the beginning of each fiscal year of the
Trust by the Railroad Retirement Board. Such
amount shall not be less than 10 percent of the
amount of the funds handled. In no case shall
such bond be less than $1,000 nor more than
$500,000, except that the Railroad Retirement
Board, after consideration of the record, may
prescribe an amount in excess of $500,000,
subject to the 10 per centum limitation of the
preceding sentence.
``(ii) It shall be unlawful for any Trust
official to receive, handle, disburse, or
otherwise exercise custody or control of any of
the funds or other property of the Fund without
being bonded as required by this subsection and
it shall be unlawful for any Trust official, or
any other person having authority to direct the
performance of such functions, to permit such
functions, or any of them, to be performed by
any Trust official, with respect to whom the
requirements this subsection have not been met.
``(iii) It shall be unlawful for any person
to procure any bond required by this subsection
from any surety or other company or through any
agent or broker in whose business operations
such person has any control or significant
financial interest, direct or indirect.
``(E) Audit and report.--
``(i) The Trust shall annually engage an
independent qualified public accountant to
audit the financial statements of the Fund.
``(ii) The Trust shall submit an annual
management report to the Congress not later
than 180 days after the end of the Trust's
fiscal year. A management report under this
subsection shall include--
``(I) a statement of financial
position;
``(II) a statement of operations;
``(III) a statement of cash flows;
``(IV) a statement on internal
accounting and administrative control
systems;
``(V) the report resulting from an
audit of the financial statements of
the Trust conducted under subparagraph
(E)(i); and
``(VI) any other comments and
information necessary to inform the
Congress about the operations and
financial condition of the Trust and
the Fund.
``(iii) The Trust shall provide the
President, the Railroad Retirement Board, and
the Director of the Office of Management and
Budget a copy of the management report when it
is submitted to Congress.
``(F) Enforcement.--The Railroad Retirement Board may
bring a civil action--
``(i) to enjoin any act or practice by the
Railroad Retirement Investment Trust, its Board
of Trustees or its employees or agents that
violates any provision of this Act; or
``(ii) to obtain other appropriate relief to
redress such violations, or to enforce any
provisions of this Act.
``(6) Rules and administrative powers.--The Board of Trustees
shall have the authority to make rules to govern its
operations, employ professional staff, and contract with
outside advisers to provide legal, accounting, investment
advisory or other services necessary for the proper
administration of this subsection. In the case of contracts
with investment advisory services, compensation for such
services may be on a fixed contract fee basis or on such other
terms and conditions as are customary for such services.
``(7) Quorum.--Five members of the Board of Trustees
constitute a quorum to do business. Investment guidelines must
be adopted by a unanimous vote of the entire Board of Trustees.
All other decisions of the Board of Trustees shall be decided
by a majority vote of the quorum present. All decisions of the
Board of Trustees shall be entered upon the records of the
Board of Trustees.''.
(b) Conforming and Technical Amendments Governing Investments.--
Subsection 15(e) of the Railroad Retirement Act of 1974 is amended--
(1) beginning in the first sentence, by striking ``, the Dual
Benefits Payments Account'' and all that follows through ``may
be made only'' in the second sentence and inserting ``and the
Dual Benefits Payments Account as are not transferred to the
Railroad Retirement Investment Trust as the Board may
determine'';
(2) by striking ``the Second Liberty Bond Act, as amended''
and inserting ``chapter 31 of title 31''; and
(3) by striking ``the foregoing requirements'' and inserting
``the requirements of this subsection''.
(c) Effective Date.--The amendments made by this section shall take
effect on the date of the enactment of this section.
SEC. 106. ELIMINATION OF SUPPLEMENTAL ANNUITY ACCOUNT.
(a) Source of Payments.--Section 7(c)(1) of the Railroad Retirement
Act of 1974 is amended by striking ``payments of supplemental annuities
under section 2(b) of this Act shall be made from the Railroad
Retirement Supplemental Account, and''.
(b) Elimination of Account.--Section 15(c) of the Railroad Retirement
Act of 1974 is repealed.
(c) In General.--Section 15(a) of the Railroad Retirement Act of 1974
is amended by striking ``, except those portions of the amounts covered
into the Treasury under sections 3211(b),'' and all that follows
through the end of the subsection and inserting a period.
(d) Effective Date.--The amendments made by this section shall take
effect January 1, 2001, except that the Railroad Retirement
Supplemental Account shall continue to exist until the transfer
authorized by the following sentence occurs. As soon as possible after
December 31, 2000, the Board shall determine the balance in the
Railroad Retirement Supplemental Account and shall direct the Secretary
of the Treasury to transfer such amount to the Railroad Retirement
Trust Fund and the Secretary shall make such transfer.
SEC. 107. TRANSFER AUTHORITY REVISIONS.
(a) Railroad Retirement Account.--Section 15 of the Railroad
Retirement Act of 1974 is amended by adding after subsection (j) the
following:
``(k) Transfers to the Fund.--The Board shall, upon establishment of
the Railroad Retirement Trust Fund and from time to time thereafter,
direct the Secretary of the Treasury to transfer, in such manner as
will maximize the investment returns to the Railroad Retirement system,
that portion of the Railroad Retirement Account that is not needed to
pay current administrative expenses of the Board to the Railroad
Retirement Trust Fund. The Secretary shall make that transfer.''.
(b) Railroad Retirement Trust Fund.--Section 15 of the Railroad
Retirement Act of 1974, as amended by subsection (a), is further
amended by adding after subsection (k) the following:
``(l) Railroad Retirement Trust Fund.--The Railroad Retirement Trust
shall from time to time transfer to the disbursing agent described in
section 7(b)(4) such amounts as may be necessary to pay benefits under
this Act (other than benefits paid from the Social Security Equivalent
Benefit Account or the Dual Benefit Payments Account).''.
(c) Social Security Equivalent Benefit Account.--Section 15A(d)(2) of
the Railroad Retirement Act of 1974 is amended to read as follows:
``(2) Upon establishment of the Railroad Retirement Trust Fund and
from time to time thereafter, the Board shall direct the Secretary of
the Treasury to transfer, in such manner as will maximize the
investment returns to the Railroad Retirement system, the balance of
the Social Security Equivalent Benefit Account not needed to pay
current benefits required to be paid from that Account to the Railroad
Retirement Trust Fund, and the Secretary shall make that transfer. Any
balance transferred under this paragraph shall be used by the Railroad
Retirement Trust only to pay benefits under this Act or to purchase
obligations of the United States that are backed by the full faith and
credit of the United States pursuant to chapter 31 of title 31, United
States Code. The proceeds of sales of, and the interest income from,
such obligations shall be used by the Trust only to pay benefits under
this Act.''.
(2) Transfers to disbursing agent.--Section 15A(c)(1) of the
Railroad Retirement Act of 1974 is amended by adding at the end
the following: ``The Secretary shall from time to time transfer
to the disbursing agent under section 7(b)(4) amounts necessary
to pay those benefits.''.
(3) Conforming amendment.--Section 15A(d)(1) of the Railroad
Retirement Act of 1974 is amended by striking the second and
third sentences.
(d) Dual Benefits Payments Account.--Section 15(d)(1) of the Railroad
Retirement Act of 1974 is amended by adding at the end the following:
``The Secretary of the Treasury shall from time to time transfer from
the Dual Benefits Payments Account to the disbursing agent under
section 7(b)(4) amounts necessary to pay benefits payable from that
Account.''.
(e) Certification by the Board and Payment.--Paragraph (4) of section
7(b) of the Railroad Retirement Act of 1974 is amended to read as
follows:
``(4)(A) The Railroad Retirement Board, after consultation with the
Board of Trustees of the Railroad Retirement Trust and the Secretary of
the Treasury, shall enter into an arrangement with a nongovernmental
financial institution to serve as disbursing agent for benefits payable
under this Act who shall disburse consolidated benefits under this Act
to each recipient.
``(B) The Board shall from time to time certify--
``(i) to the Secretary of the Treasury the amounts required
to be transferred from the Social Security Equivalent Benefit
Account and the the Dual Benefits Payments Account to the
disbursing agent to make payments of benefits and the Secretary
of the Treasury shall transfer those amounts;
``(ii) to the Board of Trustees of the Railroad Retirement
Investment Trust the amounts required to be transferred from
the Railroad Retirement Investment Trust to the disbursing
agent to make payments of benefits and the Board of Trustees
shall transfer those amounts; and
``(iii) to the disbursing agent the name and address of each
individual entitled to receive a payment, the amount of such
payment, and the time at which the payment should be made.''.
(f) Benefit Payments.--Section 7(c)(1) of the Railroad Retirement Act
of 1974 is amended--
(1) by striking ``from the Railroad Retirement Account'' and
inserting ``by the disbursing agent under subsection (b)(4)
from money transferred to it from the Railroad Retirement Trust
Fund or the Social Security Equivalent Benefit Account, as the
case may be''; and
(2) by inserting ``by the disbursing agent under subsection
(b)(4) from money transferred to it'' after ``Public Law 93-445
shall be made''.
(g) Transitional Rule for Existing Obligation.--In making transfers
under subsections (a) and (c), the Board shall consult with the
Secretary of the Treasury to design an appropriate method to transfer
obligations held as of the date of enactment or to convert such
obligations to cash prior to transfer. The Railroad Retirement Trust
may hold to maturity any obligations so received or may redeem them
prior to maturity, as the Trust deems appropriate.
SEC. 108. ANNUAL RATIO PROJECTIONS AND CERTIFICATIONS BY THE RAILROAD
RETIREMENT BOARD.
(a) Projections.--Section 22(a)(1) of the Railroad Retirement Act of
1974 is amended--
(1) by adding the following sentence after the first
sentence: ``On or before May 1 of each year beginning in 2002,
the Railroad Retirement Board shall compute its projection of
the account benefits ratio and the average account benefits
ratio (as defined by section 3241(c) of the Internal Revenue
Code of 1986) for each of the next succeeding five fiscal
years.''; and
(2) by striking ``the projection prepared pursuant to the
preceding sentence'' and inserting ``the projections prepared
pursuant to the preceding two sentences''.
(b) Certifications.--The Railroad Retirement Act of 1974 is amended
by adding at the end the following:
``computation and certification of account benefit ratios
``Sec. 23. (a) On or before November 1, 2002, the Railroad Retirement
Board shall--
``(1) compute the account benefits ratios for each of the
most recent 10 preceding fiscal years, and
``(2) certify the account benefits ratios for each such
fiscal year to the Secretary.
``(b) On or before November 1 of each year after 2002, the Railroad
Retirement Board shall--
``(1) compute the account benefits ratio for the fiscal year
ending in such year, and
``(2) certify the account benefits ratio for such fiscal year
to the Secretary.
``(c) Definition.--As used in this section, the term `account benefit
ratio' has the meaning given that term in section 3241(c) of the
Internal Revenue Code of 1986.''.
TITLE II--AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986
SEC. 201. AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986.
Except as otherwise provided, whenever in this title an amendment or
repeal is expressed in terms of an amendment to, or repeal of, a
section or other provision, the reference shall be considered to be
made to a section or other provision of the Internal Revenue Code of
1986.
SEC. 202. EXEMPTION FROM TAX FOR RAILROAD RETIREMENT INVESTMENT TRUST.
Subsection (c) of section 501 is amended by adding at the end the
following new paragraph:
``(28) The Railroad Retirement Investment Trust established
under section 15(j) of the Railroad Retirement Act of 1974.''
SEC. 203. REPEAL OF SUPPLEMENTAL ANNUITY TAX.
(a) Repeal of Tax on Employee Representatives.--Section 3211 is
amended by striking subsection (b).
(b) Repeal of Tax on Employers.--Section 3221 is amended by striking
subsections (c) and (d).
(c) Effective Date.--The amendments made by this section shall apply
to calendar years beginning after December 31, 2000.
SEC. 204. EMPLOYER, EMPLOYEE REPRESENTATIVE, AND EMPLOYEE TIER 2 TAX
RATE ADJUSTMENTS.
(a) Rate of Tax on Employers.--Subsection (b) of section 3221 is
amended to read as follows:
``(b) Tier 2 Tax.--
``(1) In general.--In addition to other taxes, there is
hereby imposed on every employer an excise tax, with respect to
having individuals in his employ, equal to the applicable
percentage of the compensation paid during any calendar year by
such employer for services rendered to such employer.
``(2) Applicable percentage.--For purposes of paragraph (1),
the term `applicable percentage' means--
``(A) 15.6 percent in the case of compensation paid
during 2001,
``(B) 14.2 percent in the case of compensation paid
during 2002, and
``(C) in the case of compensation paid during any
calendar year after 2002, the percentage determined
under section 3241 for such calendar year.''.
(b) Rate of Tax on Employee Representatives.--Section 3211, as
amended by section 203, is amended by striking subsection (a) and
inserting the following new subsections:
``(a) Tier 1 Tax.--In addition to other taxes, there is hereby
imposed on the income of each employee representative a tax equal to
the applicable percentage of the compensation received during any
calendar year by such employee representative for services rendered by
such employee representative. For purposes of the preceding sentence,
the term `applicable percentage' means the percentage equal to the sum
of the rates of tax in effect under subsections (a) and (b) of section
3101 and subsections (a) and (b) of section 3111 for the calendar year.
``(b) Tier 2 Tax.--
``(1) In general.--In addition to other taxes, there is
hereby imposed on the income of each employee representative a
tax equal to the applicable percentage of the compensation
received during any calendar year by such employee
representatives for services rendered by such employee
representative.
``(2) Applicable percentage.--For purposes of paragraph (1),
the term `applicable percentage' means--
``(A) 14.75 percent in the case of compensation
received during 2001,
``(B) 14.20 percent in the case of compensation
received during 2002, and
``(C) in the case of compensation received during any
calendar year after 2002, the percentage determined
under section 3241 for such calendar year.
``(c) Cross Reference.--
``For application of different contribution bases
with respect to the taxes imposed by subsections (a) and (b), see
section 3231(e)(2).''.
(c) Rate of Tax on Employees.--Subsection (b) of section 3201 is
amended to read as follows:
``(b) Tier 2 Tax.--
``(1) In general.--In addition to other taxes, there is
hereby imposed on the income of each employee a tax equal to
the applicable percentage of the compensation received during
any calendar year by such employee for services rendered by
such employee.
``(2) Applicable percentage.--For purposes of paragraph (1),
the term `applicable percentage' means--
``(A) 4.90 percent in the case of compensation
received during 2001 or 2002, and
``(B) in the case of compensation received during any
calendar year after 2002, the percentage determined
under section 3241 for such calendar year.''.
(d) Determination of Rate.--Chapter 22 is amended by adding at the
end thereof the following new subchapter:
``Subchapter E--Tier 2 Tax Rate Determination
``Sec. 3241. Determination of tier 2 tax
rate based on average account
benefits ratio.
``SEC. 3241. DETERMINATION OF TIER 2 TAX RATE BASED ON AVERAGE ACCOUNT
BENEFITS RATIO.
``(a) In General.--For purposes of sections 3201(b), 3211(b), and
3221(b), the applicable percentage for any calendar year is the
percentage determined in accordance with the table in subsection (b).
``(b) Tax Rate Schedule.--
------------------------------------------------------------------------
Average account benefits ratio Applicable
----------------------------------- percentage for Applicable
sections 3211(b) percentage for
At least But less than and 3221(b) section 3201(b)
------------------------------------------------------------------------
2.5 22.1 4.9
2.5 3.0 18.1 4.9
3.0 3.5 15.1 4.9
3.5 4.0 14.1 4.9
4.0 6.1 13.1 4.9
6.1 6.5 12.6 4.4
6.5 7.0 12.1 3.9
7.0 7.5 11.6 3.4
7.5 8.0 11.1 2.9
8.0 8.5 10.1 1.9
8.5 9.0 9.1 0.9
9.0 8.2 0
------------------------------------------------------------------------
``(c) Definitions Related to Determination of Rates of Tax.--
``(1) Average account benefits ratio.--For purposes of this
section, the term `average account benefits ratio' means, with
respect to any calendar year, the average determined by the
Secretary of the account benefits ratios for the 10 most recent
fiscal years ending before such calendar year. If the amount
determined under the preceding sentence is not a multiple of
0.1, such amount shall be increased to the next highest
multiple of 0.1.
``(2) Account benefits ratio.--For purposes of this section,
the term `account benefits ratio' means, with respect to any
fiscal year, the amount determined by the Railroad Retirement
Board by dividing the fair market value of the assets in the
Railroad Retirement Account and of the Railroad Retirement
Investment Trust as of the close of such fiscal year by the
total benefits and administrative expenses paid from the
Railroad Retirement Account and the Railroad Retirement
Investment Trust during such fiscal year.
``(d) Notice.--No later than December 1 of each calendar year, the
Secretary shall publish a notice in the Federal Register of the rates
of tax determined under this section which are applicable for the
following calendar year.''.
(e) Conforming Amendments.--
(1) Section 24(d)(3)(A)(iii) is amended by striking ``section
3211(a)(1)'' and inserting ``section 3211(a)''.
(2) Section 72(r)(2)(B)(i) is amended by striking ``section
3211(a)(2)'' and inserting ``section 3211(b)''.
(3) Paragraphs (2)(A)(iii)(II) and (4)(A) of section 3231(e)
is amended by striking ``3211(a)(1)'' and inserting
``3211(a)''.
(4) Section 3231(e)(2)(B)(ii)(I) is amended by striking
``3211(a)(2)'' and inserting ``3211(b)''.
(5) The table of subchapters for chapter 22 is amended by
adding at the end the following new item:
``Subchapter E. Tier 2 tax rate
determination.''.
(f) Effective Date.--The amendments made by this section shall apply
to calendar years beginning after December 31, 2000.
Introduction
The railroad retirement system was created separate from
the Social Security program through a series of laws enacted in
the 1930's, culminating in the Railroad Retirement and
Carriers' Taxing Act of 1937. There was ample precedent for
legislation taking into account the particular circumstances of
the rail industry. Numerous laws pertaining to rail operations
and safety, as well as the Railway Labor Act of 1926, had been
enacted since the Interstate Commerce Act of 1887, and many
more have been enacted since the 1930's.
The need for a separate railroad retirement system arose
from the inadequate financing of many of the railroads'
preexisting private pension plans, and a desire for immediate
benefit payments based on prior service. Social Security did
not begin paying benefits until 1940 and did not credit service
prior to 1937.
Substantive changes to the Railroad Retirement and
Carriers' Taxing Acts of 1937, including its replacement by the
current Railroad Retirement Act of 1974, and substantive
amendments to that latter Act have generally been enacted by
the basis of joint recommendations negotiated by
representatives of rail labor and management.
The last major reform to railroad retirement occurred in
1983 with enactment of the Railroad Retirement Solvency Act.
This Act raised Tier II tax rates on both employers and
employees, and for the first time subjected railroad retirement
Tier II benefits to federal income tax. It also raised the age
at which one can receive a full annuity from 60 with thirty
years of service to 62 with thirty years of service.
The railroad retirement system is administered by the
Railroad Retirement Board, which is an independent agency in
the executive branch of the United States Government. The Board
has three members, each of whom is appointed by the President
and confirmed by the Senate. The Railroad Retirement Act
requires that one Board Member be appointed upon the
recommendation of railroad labor and another Member appointed
upon the recommendation of rail management. The Chair is
appointed to represent the public at large.
Annuities paid under the Railroad Retirement Act consist of
different components called tiers. The Tier I benefit is based
upon both the railroad and non-railroad earnings of the
railroad employee, using social security formulas, and
approximates what would be payable under the Social Security
Act. Tier II benefits are based on an employee's railroad
service only and are computed under benefit formulas in the
Railroad Retirement Act. Tier II is the functional equivalent
of a private industry-wide pension plan.
In fiscal year 1999, the Railroad Retirement Board paid
$8.2 billion in retirement and survivor benefits to 748,000
beneficiaries. At the end of fiscal year 1999, there were
316,358 railroad retirees, 167,478 spouses or divorced spouses
of retirees, and 219,341 survivors receiving railroad
retirement benefits.
Payroll taxes on railroad employers and employees serve as
the primary source of funding for railroad retirement benefits.
Other sources include transfers under the financial interchange
with the Social Security system; investment earnings from the
trust funds; general revenue appropriations for vested dual
benefits; income taxes on benefits and a work hour tax paid by
railroad employers called the supplemental annuity tax.
The changes made in H.R. 4844 apply only to the Tier II
component of railroad retirement and are funded entirely by
payroll taxes on railroad employers and employees and earnings
from the investment of those taxes. Currently, railroads pay a
16.1 per cent payroll tax and employees pay a 4.9 percent
payroll tax for Tier II benefits. H.R. 4844 would not create or
require any general fund subsidies to the railroad system.
On September 17, 1998, the then-Subcommittee on Railroads
held a hearing on H. Con. Res. 52, Modifying the Railroad
Retirement Tier II Benefits for Widows and Widowers, which had
been introduced by Congressman Jack Quinn (R-NY). H. Con. Res.
52 was a concurrent resolution urging that the railroad
industry, including rail labor, management and retiree
organizations, open discussions for adequately funding an
amendment to the Railroad Retirement Act of 1974 to modify the
guaranteed minimum benefit for widows and widowers. Following
the hearing, rail labor and management initiated discussions on
a comprehensive reform of railroad retirement. H.R. 4844,
cosponsored by the bipartisan leadership of the Transportation
and Infrastructure Committee and the Ways and Means Committee,
embodies the agreement between management and a majority of
rail labor that was the result of those negotiations.
Summary of H.R. 4844
Changes to the tax structure
Both Railroad Retirement benefits and payroll tax rates are
fixed by current law. Thus, changes in the system require
Congressional action. H.R. 4844 would make the Tier II tax
rates more responsive to actual financing needs by the
establishment of an automatic tax adjustment formula. Under
this statutory formula, payroll taxes would be raised or
lowered automatically, without further action by Congress,
depending on the level of funds available to pay benefits. (A
similar system of adjustable tax rates for railroad
unemployment benefits was enacted in 1988.)
Payroll taxes would be set each calendar year, pursuant to
a statutory formula. In any calendar year for which the 10-year
average balance ratio \1\ at the close of the previous fiscal
year was no lower than 4.0 percent and no higher than 6.0
percent, tax rates would be set at ``normal'' levels of 13.1
percent for the employer and 4.9 percent for the employee. (The
proposed reduction of the employer tax rate from the current
16.1 percent to 13.1 percent is discussed below.) These
``normal'' rates are projected to keep the average balance at
or above a 4-year benefit reserve over the next 75 years, based
on improving returns by an estimated 2 percentage points
(discussed below). If the average fund balance ratio falls
below 4.0 percent or exceeds 6.0 percent, the tax rates would
vary in accordance with the statutory formula. The 4-year
minimum benefits reserve requirement represents the highest
level of reserves in the Railroad Retirement Account over the
last 40 years. Key features of the operation of the tax
adjustment mechanism include:
---------------------------------------------------------------------------
\1\ This is the ratio of the fund balance to estimated annual
benefit payments and administrative expenses.
---------------------------------------------------------------------------
Allocation of Tax Rate Changes: Any increase in
the payroll tax above the normal rates would be borne entirely
by railroad employers. Any reduction in the rates below the
normal rates would be divided equally between railroad
employers and employees.
Future Benefit Changes: If the average fund
balance ratio exceeds 6.0 percent, employees may choose between
a Tier II tax rate reduction specified in the statute, or a
benefit increase of equal value. Benefit increases would be
legislated by Congress, and management has agreed to support
enactment of this legislation.
Increase in Employee Tax Rate by Additional
Benefit Equivalent: If any additional benefit is enacted as
agreed above, the legislation would provide that the employee
tax rate that otherwise would be effective under the statutory
formula would be increased by the cost of the benefit.
Investment of assets
Currently, investment of RRA assets is limited to U.S.
government securities. Railroad Retirement Board projections
for the RRA assume an annual return of 6 percent of
investments. Between 1985 and 1998, the average annual return
on RRA assets was unusually high at 9.12 per cent, but this
still lagged far behind the average annual return in large
multi-employer pension plans of 15.17 percent over the same
period. Under H.R. 4844, authority would be provided for Tier
II RRA assets to be invested in a new diversified investment
portfolio, as are assets of private sector pension plans. A
Railroad Retirement Investment Trust would be established to
invest the assets of the RRA in a Trust Fund outside of
Treasury. An independent Board of Trustees would be appointed
to administer the Trust. The Trustees would be responsible for
establishing investment guidelines for the prudent management
of Tier II assets and for selecting outside investment advisors
and managers to implement investment policies. There would be 7
members of the Board of Trustees, all with investment
experience and selected by a unanimous vote of the Railroad
Retirement Board.
In designing this investment proposal, it was assuming that
investments by the Trust would result in an average annual
return of 8 percent, i.e., 2 percentage points above current
projections. Improving performance of the Trust portfolio by
this amount permits the enhancement of employee benefits and
the reduction of railroad employer tax rates, while maintaining
at least an average benefit reserve of 4 years or more. Based
on future projections about rates of returns, employment
levels, and other variables, the employee tax rate could be
reduced in the future.
Benefit improvements
More effective management of Tier II assets would allow for
the adoption of certain benefit improvements while protecting
the long-term stability of the railroad retirement system.
Payment of vested dual benefits and supplemental annuity
benefits would continue as under current law. The bill would
provide for the following benefit improvements.
Expansion of Surviving Spouse Benefit. Surviving
spouses would inherit the full Tier II annuity of the deceased
retiree. Currently, the surviving spouse mayreceive no more
than 50 percent of the retiree's annuity.
Liberalized Early Retirement. Currently, an
employee with 30 years of service is eligible to retire at age
62 with no actuarial reduction in benefits. H.R. 4844 would
allow for early retirement at age 60 with 30 years of service
without a benefit reduction. As such, the bill would return the
early retirement eligibility age to its pre-1983 level. The
spouse of such an employee would also be eligible for an
unreduced annuity at age 60.\2\
---------------------------------------------------------------------------
\2\ Post-retirement Health Benefit. As part of the national
collective bargaining agreement between labor and rail management, an
early retirement health benefits plan is available for retirees at age
61. Management and labor have agreed to re-negotiate the agreement to
lower the eligibility age to 60 and to adjust the maximum lifetime
benefit for medical inflation, if H.R. 4844 is enacted. This would
conform eligibility for this private health benefit plan with
eligibility for early retirement.
---------------------------------------------------------------------------
Liberalized Vesting. The ten-year service
requirement to vest for Tier I and Tier II annuities would be
reduced to five years. Any employee with five years of post-
1995 service would be vested. This requirement would be
consistent with private industry practices.
Railroad Retirement Act Maximum. The limit on
certain Tier II annuities awarded to an employee and an
employee's spouse would be repealed.
Tax reductions
Railroad employers currently pay 16.1 percent of taxable
payroll into the Tier II account. Improved earnings from
investing the Tier II assets would permit a phased reduction of
employer taxes over the first three years following enactment
of the proposal. The phase-in would occur as follows: 15.6
percent in 2001; 14.2 percent in 2002; and 13.1 percent in
2003. Employee tax rates would continue at the current 4.9
percent, except as provided under the tax adjustment mechanism
described above.
In addition, the supplemental annuity tax (SAT) would be
eliminated and supplemental annuity benefits would be paid
directly from the Trust. (There would be no change in
supplemental annuity benefits paid to eligible retirees.) The
SAT is a cents-per-hour tax, currently set at 26.5 cents, paid
only by employers. Benefits are available only to employees
hired prior to October 1981.
Administration
H.R. 4844 would continue the basic administrative structure
of railroad retirement for Tier I, the railroad industry
counterpart to Social Security. Tier II benefits would be paid
from the Trust, which would be administered by a fiduciary,
seven-member Board of Trustees. The Board is required to hire
professional investment managers. Management of the Trust
assets is subject to fiduciary standards similar to those under
ERISA.
Conclusion
H.R. 4844 is a landmark piece of legislation that provides
benefits for all the participants in the railroad retirement
system. It modernizes and strengthens the financing of the
program while also providing for improved retirement benefits
for railroad workers and their families.
Hearings and Legislative History
No hearings were held by the Committee on H.R. 4844.
Committee Consideration
On July 19, 2000, the Ground Transportation Subcommittee
and the Full Committee met in open session and favorably
reported H.R. 4844.
Rollcall Votes
Clause 3(b) of rule XIII of the House of Representatives
requires each committee report to include the total number of
votes cast for and against on each rollcall vote on a motion to
report and on any amendment offered to the measure or matter,
and the names of those members voting for and against. There
was one rollcall vote on final passage with 62 ayes and 1 nay.
Following are the names of those members voting for and
against.
AYES NAY
Mr. Baird Mr. Taylor (MS)
Mr. Baldacci
Mr. Barcia
Mr. Bass
Mr. Bateman
Mr. Bereuter
Mr. Berkley
Mr. Blumenauer
Mr. Boehlert
Mr. Borski
Ms. Brown
Mr. Clement
Mr. Coble
Mr. Cook
Mr. Cooksey
Mr. Costello
Ms. Danner
Mr. DeMint
Mr. Doolittle
Mr. Duncan
Mr. Ehlers
Mr. Ewing
Mr. Filner
Mrs. Fowler
Mr. Franks
Mr. Gilchrest
Mr. Holden
Mr. Horn
Mr. Hutchinson
Ms. Johnson
Mrs. Kelly
Mr. Kuykendall
Mr. Lahood
Mr. Lampson
Mr. LaTourette
Mr. LoBiondo
Mr. McGovern
Mr. Mascara
Mr. Menendez
Mr. Metcalf
Mr. Mica
Ms. Millender-McDonald
Mr. Miller
Mr. Morgan
Mr. Ney
Ms. Norton
Mr. Oberstar
Mr. Pascrell
Mr. Pease
Mr. Petri
Mr. Quinn
Mr. Rahall
Mr. Sandlin
Mr. Sherwood
Mr. Simpson
Mr. Sweeney
Mrs. Tauscher
Mr. Terry
Mr. Thune
Mr. Vitter
Mr. Wise
Mr. Shuster
Cost of Legislation
Clause 3(d)(2) of rule XIII of the Rules of the House of
Representatives is satisfied where a cost estimate and
comparison prepared by the Director of the Congressional Budget
Office (CBO) under section 402 of the Congressional Budget Act
of 1974 has been timely submitted prior to the filing of the
report and is included in the report. The Committee has
received no cost estimate and comparison. When available it
will be printed in the Congressional Record.
Committee Cost Estimate
The changes in railroad employee benefits proposed by H.R.
4844 are estimated to result in an increase in budget authority
of approximately $112 million in 2001, and $1.3 billion for the
five-year period from 2001 through 2005. The changes in
railroad taxes proposed by the bill are estimated to result in
a decrease in revenues of approximately $87 million in 2001,
and $1.4 billion for the five-year period from 2001 through
2005.
In addition to these benefit payment increases and payroll
tax decreases, H.R. 4844 would authorize the transfer of the
balance currently held in the Rail Industry Pension Fund to the
newly created Railroad Retirement Investment Trust (RRIT). The
RRIT would be authorized to invest this balance in a
diversified portfolio, including corporate stocks and bonds,
similar to other multi-employer pension funds.
The scoring of investments such as those authorized by H.R.
4844 is currently an unresolved issue of budget concepts. There
are two options for scoring investments held outside of the
U.S. Treasury. Under a conventional budget treatment, any
investments made by the RRIT outside of U.S. Treasury
securities would be scored as an immediate outlay, since the
cash would physically be leaving the Treasury. This
conventional budget treatment makes no distinction between
Government expenditures to purchase goods or services, and
Government expenditures to purchase financial assets. In terms
of personal finance, this is the equivalent of saying that
writing a $1,000 check from your checking account to purchase
shares in a mutual fund is the same as writing a $1,000 check
to finance a vacation. This conventional budget treatment would
result in H.R. 4844 being scored as causing an increase in
outlays of approximately $15 billion in FY 2001.
Alternatively, investments made by the RRIT outside of
Treasury could be considered to be a non-scoreable means of
financing. Under this alternative budget treatment, the upfront
investment by the RRIT in corporate stocks and bonds would not
be scored as outlays. In addition, the increased rate of return
that would be earned on the investments make outside of
Treasury would be scored as increased revenues to the
Government, thereby offsetting in part the costs of the
increased benefits and decreased taxes discussed above. The
Committee believes that this alternative budget treatment is
more appropriate than the conventional budget treatment in this
case, as it better reflects the true cost of H.R. 4844.
The Committee will file a supplemental report containing a
cost estimate prepared by the Congressional Budget Office
pursuant to section 402 of the Congressional Budget Act when it
becomes available.
Compliance With House Rule XIII
1. Pursuant to clause 3(c)(1) of rule XIII of the Rules of
the House of Representatives, oversight findings and
recommendations have been made by the Committee as reflected in
this report.
2. With respect to the requirement of clause 3(c)(2) of
rule XIII of the Rules of the House of Representatives, and
308(a) of the Congressional Budget Act of 1974, the Committee
references the report of the Congressional Budget Office has
not been received. When available, it will be printed in the
Congressional Record.
3. With respect to the requirement of clause 3(c)(4) of
rule XIII of the Rules of the House of Representatives, the
Committee has received no report of oversight findings and
recommendations from the Committee on Government Reform on the
subject of H.R. 4844.
4. With respect to the requirement of clause 3(c)(3) of
rule XIII of the Rules of the House of Representatives and
section 402 of the Congressional Budget Act of 1974, a cost
estimate from the Director of Congressional Budget Office (CBO)
is not available.
Constitutional Authority Statement
Pursuant to clause (3)(d)(1) of Rule XIII of the Rules of
the House of Representatives, committee reports on a bill or
joint resolution of a public character shall include a
statement citing the specific powers granted to the Congress in
the Constitution to enact the measure. The Committee on
Transportation and Infrastructure finds that Congress has the
authority to enact this measure pursuant to its powers granted
under article I, section 8 of the Constitution.
Federal Mandates Statement
The Committee adopts as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Act. (Public Law 104-4.)
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Applicability to the Legislative Branch
The Committee finds that the legislation does not relate
and conditions of employment or access to public service or
accommodations within the meaning of Section 102(b)(3) of the
Congressional Accountability Act. (Public Law 104-1.)
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
RAILROAD RETIREMENT ACT OF 1974
* * * * * * *
annuity eligibility requirements
Sec. 2. (a)(1) The following-described individuals, if they
shall have completed ten years of service or, for purposes of
paragraphs (i), (iii), and (v), five years of service, all of
which accrues after December 31, 1995, and shall have filed
application for annuities, shall, subject to the conditions set
forth in subsections (e), (f), and (h), be entitled to
annuities in the amounts provided under section 3 of this Act--
(i) * * *
* * * * * * *
(4) An individual who is entitled to an annuity under
paragraph (v) of subdivision (1), but who does not have at
least ten years of service, shall, prior to the month in which
the individual attains age 62, be entitled only to an annuity
amount computed under section 3(a) of this Act (without regard
to section 3(a)(2) of this Act) or section 3(f)(3) of this Act.
Upon attainment of age 62, such an individual may also be
entitled to an annuity amount computed under section 3(b), but
such annuity amount shall be reduced for early retirement in
the same manner as if the individual were entitled to an
annuity under section 2(a)(1)(iii).
* * * * * * *
(d)(1) The following described survivors of a deceased
employee who will have completed ten years of service or five
years of service, all of which accrues after December 31, 1995,
and will have had a current connection with the railroad
industry at the time of his death shall, subject to the
conditions set forth in subsections (g) and (h), be entitled to
annuities, if they have filed application therefor, in the
amounts provided under section 4 of this Act--
(i) * * *
* * * * * * *
(i) An individual entitled to an annuity under this section
who has completed five years of service, all of which accrues
after 1995, but who has not completed ten years of service, and
the spouse, divorced spouse, and survivors of such individual,
shall not be entitled to an annuity amount provided under
section 3(a), section 4(a), or section 4(f) of this Act unless
the individual, or the individual's spouse, divorced spouse, or
survivors, would be entitled to a benefit under the Social
Security Act on the basis of the individual's employment record
under both the Railroad Retirement Act and the Social Security
Act.
computation of employee annuities
Sec. 3. (a)(1) * * *
(2) For purposes of this subsection, individuals entitled to
an annuity under section 2(a)(1)(ii) of this Act shall, except
for the purposes of recomputations in accordance with section
215(f) of the Social Security Act, be deemed to have attained
retirement age (as defined by section 216(l) of the Social
Security Act). For purposes of this subsection, individuals
entitled to an annuity under paragraph (iv) or (v) of such
section 2(a)(1) shall be deemed to be entitled to a disability
insurance benefit under section 223 of the Social Security Act.
[(3) In lieu of an annuity amount provided under subdivision
(1), the annuity of an individual entitled to an annuity under
paragraph (ii) of section 2(a)(1) of this Act which begins to
accrue before the individual attains age 62 shall be in an
amount equal to--
[(i) for each month prior to the first month
throughout which the individual is age 62, the amount
(after any reduction on account of age but before any
deductions on account of work) of the old-age insurance
benefit to which such individual would have been
entitled under the Social Security Act as of the date
on which such individual's annuity begins to accrue if
such individual had attained age 62 on the first day of
the month in which his or her annuity begins to accrue
and if all of such individual's service as an employee
after December 31, 1936, had been included in the term
``employment'' as defined in that Act, using for
purposes of this computation the number of benefit
computation years applicable to a person born in the
year in which such individual was born; and
[(ii) for months beginning with the first month
throughout which the individual is age 62, the amount
(after any reduction on account of age but before any
deductions on account of work) of the old-age insurance
benefit to which such individual would have been
entitled under the Social Security Act if all of such
individual's service as an employee after December 31,
1936, had been included in the term ``employment'' as
defined in that Act.]
(3) If an individual entitled to an annuity under section
2(a)(1)(i) or (iii) of this Act on the basis of less than ten
years of service is entitled to a benefit under section 202(a),
section 202(b), or section 202(c) of the Social Security Act
which began to accrue before the annuity under section
2(a)(1)(i) or (iii) of this Act, the annuity amount provided
such individual under this subsection, shall be computed as
though the annuity under this Act began to accrue on the later
of (A) the date on which the benefit under section 202(a),
section 202(b), or section 202(c) of the Social Security Act
began or (B) the date on which the individual first met the
conditions for entitlement to an age reduced annuity under this
Act other than the conditions set forth in sections 2(e)(1) and
2(e)(2) of this Act and the requirement that an application be
filed.
* * * * * * *
(f)[(1) If the total amount of an individual's annuity and
supplemental annuity computed under the preceding subsections
of this section would, before any reductions on account of age,
before any reduction due to such individual's entitlement to a
monthly insurance benefit under the Social Security Act, and
disregarding any increases in such total amount which become
effective after the date on which such individual's annuity
under section 2(a)(1) of this Act begins to accrue, exceed an
amount equal to the sum of (A) 100 per centum of his ``final
average monthly compensation'' up to an amount equal to 50 per
centum of one-twelfth of the maximum annual taxable ``wages''
(as defined in section 3121 of the Internal Revenue Code of
1954) for the calendar year in which such individual's annuity
under section 2(a)(1) of this Act begins to accrue, plus (B) 80
per centum of so much of his ``final average monthly
compensation'' as exceeds 50 per centum of one-twelfth of the
maximum annual taxable ``wages'' (as defined in section 3121 of
the Internal Revenue Code of 1954) for the calendar year in
which such individual's annuity under section 2(a)(1) of this
Act begins to accrue, the supplemental annuity of such
individual first, and then, if necessary, the annuity amount of
such individual as computed under subsection (b) of this
section, shall be reduced until such total amount of such
individual's annuity and supplemental annuity equals such sum
or until such supplemental annuity and such annuity amount
computed under subsection (b) of this section are reduced to
zero, whichever occurs first: Provided, however, That the
provisions of this subdivision shall not operate to reduce the
total amount of an individual's annuity and supplemental
annuity computed under the preceding subsections of this
section below $1,200. For purposes of this subdivision, the
``final average monthly compensation'' of an individual shall
except as provided in the following sentence be determined by
dividing the total compensation received by such individual in
the two calendar years, consecutive or otherwise, in which he
was credited with the highest total compensation during the
ten-year period ending with December 31 of the year in which
such individual's annuity under section 2(a)(1) of this Act
begins to accrue by 24. If the individual's ``average monthly
compensation'' is determined under subdivision (2) of
subsection (b) of this section, the ``final average monthly
compensation'' for such individual shall be the average of the
compensation for the 24 months in which the compensation
determined for the purpose of subdivision (2) of subsection (b)
of this section is the highest. For purposes of this
subdivision, the term ``compensation'' shall include
``compensation'' as defined in section 1(h) of this Act,
``wages'' as defined in section 209 of the Social Security Act,
``self-employment income'' as defined in section 211(b) of the
Social Security Act, and wages deemed to have been paid under
section 217 or 229 of the Social Security Act on account of
military service: Provided, however, That in no case shall the
compensation with respect to any calendar month exceed the
limitation on the compensation for such month prescribed in
subsection (j) of this section. Wages and self-employment
income included as compensation for purposes of this
subdivision shall, in the absence of evidence to the contrary,
be presumed to have been paid in equal proportions with respect
to all months in the calendar quarter in which credited, in the
case of wages paid before 1978, or in equal proportions with
respect to all months in the calendar year in which credited,
in the case of self-employment income and in the case of wages
paid after 1977.]
* * * * * * *
computation of spouse and survivor annuities
Sec. 4. (a)(1) * * *
(2) For purposes of this subsection, [if an individual is
entitled to an annuity under paragraph (ii) of section 2(a)(1)
of this Act which did not begin to accrue before such
individual attained age 62, the spouse of such individual
entitled to an annuity under clause (B) of paragraph (ii) of
section 2(c)(1) of this Act] a spouse entitled to an annuity
under section 2(c)(1)(ii)(B) of this Act shall be deemed to
have attained retirement age (as defined in section 216(l) of
the Social Security Act.
[(3) In the case of an individual entitled to an annuity
under section 2(a)(1)(ii) of this Act which began to accrue
before such individual attained age 62, the annuity of the
spouse of such individual under section 2(c) of this Act shall,
in lieu of an annuity amount provided under subdivision (1), be
in an amount equal to--
[(i) for each month prior to the first month
throughout which both the individual and the spouse are
age 62, 50 per centum of that portion of the
individual's annuity as is, or was prior to such
individual's attaining age 62, computed under section
3(a)(3)(i) of this Act, reduced to the same extent such
amount would be reduced under section 202(b)(4) of the
Social Security Act (in the case of a wife) or under
section 202(c)(2) of the Social Security Act (in the
case of a husband) as if such amount were a wife's
insurance benefit or a husband's insurance benefit,
respectively, under such Act; and
[(ii) for months beginning with the first month
throughout which both the individual and the spouse are
age 62, the amount (after any reduction on account of
age are based on the spouse's age at the time the
amount under this paragraph first becomes payable but
before any deductions on account of work) of the wife's
insurance benefit or the husband's insurance benefit to
which such spouse would have been entitled under the
Social Security Act if the individual's service as an
employee after December 31, 1936, had been included in
the term ``employment'' as defined in that Act.
[(4) In the case of an individual entitled to an annuity
under paragraph (iv) or (v) of section 2(a)(1) of this Act, the
annuity of the spouse of such individual entitled to an annuity
under section 2(c)(1)(ii)(B) of this Act shall, in lieu of an
annuity amount provided under subdivision (1), be in an amount
equal to the amount (after any reduction on account of age but
before any deductions on account of work) of the wife's
insurance benefit or the husband's insurance benefit to which
such spouse would have been entitled under the Social Security
Act if the individual's service as an employee after December
31, 1936, had been included in the term ``employment'' as
defined in that Act. For purposes of this subdivision, spouses
who have not attained age 62 shall be deemed to have attained
age 62.]
(3) If a spouse entitled to an annuity under section
2(c)(1)(ii)(A), section 2(c)(1)(ii)(C), or section 2(c)(2) of
this Act or a divorced spouse entitled to an annuity under
section 2(c)(4) of this Act on the basis of the employment
record of an employee who will have completed less than 10
years of service is entitled to a benefit under section 202(a),
section 202(b), or section 202(c) of the Social Security Act
which began to accrue before the annuity under section
2(c)(1)(ii)(A), section 2(c)(1)(ii)(C), section 2(c)(2), or
section 2(c)(4) of this Act, the annuity amount provided under
this subsection shall be computed as though the annuity under
this Act began to accrue on the later of (A) the date on which
the benefit under section 202(a), section 202(b), or section
202(c) of the Social Security Act began or (B) the first date
on which the annuitant met the conditions for entitlement to an
age reduced annuity under this Act other than the conditions
set forth in sections 2(e)(1) and 2(e)(2) of this Act and the
requirement that an application be filed.
* * * * * * *
[(c) If (A) the total amount of the annuity of a spouse of an
individual as computed under the preceding subsections of this
section as of the date on which the annuity of such individual
under section 2(a)(1) of this Act began to accrue (before any
reduction due to such spouse's entitlement to a monthly
insurance benefit under the Social Security Act) plus (B) the
total amount of the annuity and supplemental annuity of the
individual (before any reduction due to such individual's
entitlement to a monthly insurance benefit under the Social
Security Act) subject to the provisions of section 3(f)(1) of
this Act would, before any reductions in the amounts specified
in clauses (A) and (B) on account of age and disregarding any
increases in such amounts which become effective after the date
on which the individual's annuity under section 2(a)(1) of this
Act began to accrue, exceed the amount determined under clauses
(A) and (B) of section 3(f)(1) of this Act, the portion of the
annuity of such spouse determined under subsection (b) of this
section as of the date on which the individual's annuity under
section 2(a)(1) began to accrue shall be reduced until the sum
of the amounts specified in clauses (A) and (B) of the
subsection equals the amount determined under clauses (A) and
(B) of section 3(f)(1) or until such amount under subsection
(b) is reduced to zero, whichever occurs first. If, after such
amount under subsection (b) is reduced to zero, the sum of the
remaining amounts specified in clauses (A) and (B) of this
subsection still exceeds the amount determined under clauses
(A) and (B) of section 3(f)(1), the supplemental annuity of the
individual first, and then, if necessary, the annuity amount of
the individual computed under subsections (b), (c), and (d) of
section 3 as of the date on which the individual's annuity
under section 2(a)(1) began to accrue, shall be reduced until
the amounts specified in clauses (A) and (B) of this subsection
equals the amounts determined under clauses (A) and (B) of
section 3(f)(1) or until such supplemental annuity and such
annuity amount are reduced to zero, whichever occurs first.
Notwithstanding the preceding provisions of this subsection,
the provisions of thissubsection shall not operate to reduce
the total of the amounts specified in clauses (A) and (B) of this
subsection below $1,200.]
* * * * * * *
(g)(1) * * *
* * * * * * *
(10)(i) If for any month the unreduced annuity provided under
this section for a widow or widower is less than the widow's or
widower's initial minimum amount computed pursuant to paragraph
(ii) of this subdivision, the unreduced annuity shall be
increased to that initial minimum amount. For the purposes of
this subdivision, the unreduced annuity is the annuity without
regard to any deduction on account of work, without regard to
any reduction for entitlement to an annuity under section
2(a)(1) of this Act, without regard to any reduction for
entitlement to a benefit under title II of the Social Security
Act, and without regard to any reduction for entitlement to a
public service pension pursuant to sections 202(e)(7),
202(f)(2), or section 202(g)(4) of the Social Security Act.
(ii) For the purposes of this subdivision, the widow or
widower's initial minimum amount is the amount of the unreduced
annuity computed at the time an annuity is awarded to that
widow or widower, except that--
(A) in subsection (g)(1)(i) ``100 per centum'' shall
be substituted for ``50 per centum''; and
(B) in subsection (g)(2)(ii) ``130 per centum'' shall
be substituted for ``80 per centum'' both places it
appears.
(iii) If a widow or widower who was previously entitled to a
widow's or widower's annuity under section 2(d)(1)(ii) of this
Act becomes entitled to a widow's or widow's annuity under
section 2(d)(1)(i) of this Act, a new initial minimum amount
shall be computed at the time of award of the widow's or
widower's annuity under section 2(d)(1)(i) of this Act.
* * * * * * *
annuity beginning and ending dates
Sec. 5. (a) * * *
* * * * * * *
(b) An application for any payment under this Act shall be
made and filed in such manner and form as the Board may
prescribe. [An application filed with the Board for an annuity
under this Act shall, unless the applicant specified otherwise,
be deemed to be an application for any benefit to which such
applicant may be entitled under this Act or title II of the
Social Security Act.] An application filed with the Board for
an employee annuity, spouse annuity, or divorced spouse annuity
on the basis of the employment record of an employee who will
have completed less than ten years of service shall be deemed
to be an application for any benefit to which such applicant
may be entitled under this Act or section 202(a), section
202(b), or section 202(c) of the Social Security Act. An
application filed with the Board for an annuity on the basis of
the employment record of an employee who will have completed
ten years of service shall, unless the applicant specified
otherwise, be deemed to be an application for any benefit to
which such applicant may be entitled under this Act or title II
of the Social Security Act. An individual who was entitled to
an annuity under paragraph (iv) or (v) of section 2(a)(1) of
this Act for the month preceding the month in which he attained
retirement age (as defined in section 216(l) of the Social
Security Act), shall be deemed to have filed an application for
an annuity under paragraph (i) of section 2(a)(1) on the date
on which he attained retirement age (as defined in section
216(l) of the Social Security Act), and a widow or widower who
was entitled to an annuity under section 2(d)(1) of this Act on
the basis of disability for the month preceding the month in
which she or he attained age 60, shall be deemed to have filed
an application for an annuity under such section 2(d)(1) on the
basis of age on the date on which she or he attained age 60.
* * * * * * *
lump-sum payments
Sec. 6. (a) * * *
* * * * * * *
(e)(1) Every individual who will have completed ten years of
service or five or more years of service, all of which accrues
after December 31, 1995, at the time of his retirement or
death, who will have received compensation in the nature of
separation of severance pay on or after January 1, 1985, and
who would have been credited with additional months of service
pursuant to section 3(i)(4) of this Act except for the fact
that such individual was not in an employment relation to one
or more employers nor an employee representative in such
months, shall, at the time his annuity under section 2(a)(1) of
this Act begins to accrue, be entitled to a lump sum in the
amount provided under subdivision (2) of this subsection. If
the full amount of a lump sum under this subsection cannot be
determined at the time an individual's annuity under section
2(a)(1) begins to accure, such lump sum shall be payable at
such time thereafter as such amount can be determined. If an
individual otherwise eligible for a lump sum under this section
dies before he becomes entitled to an annuity under section
2(a)(1), or before he receives payment of such lump sum, such
lump sum shall be payable to the person, if any, who is
determined by the Board to be such individual's widow or
widower and who will not have died before receiving payment of
such lump sum. If there be no such widow or widower, such lump
sum shall be payable to the children, grandchildren, parents,
brothers and sisters, or the estate of the deceased individual
in the same manner as if such lump sum were a lump sum payable
under subsection (c)(1) of this section.
* * * * * * *
powers and duties of the board
Sec. 7. (a) * * *
(b)(1) * * *
(2) In the case of--
(A) an individual who will have completed ten years
of service or five or more years of service, all of
which accrues after December 31, 1995, creditable under
this Act,
* * * * * * *
[(4) The Board shall from time to time certify to the
Secretary of the Treasury the name and address of each
individual entitled to receive a payment, the amount of such
payment, and the time at which it should be made, and the
Secretary of the Treasury through the Division of Disbursements
of the Treasury Department, and prior to audit by the General
Accounting Office, shall make payment in accordance with the
certification by the Board.]
(4)(A) The Railroad Retirement Board, after consultation with
the Board of Trustees of the Railroad Retirement Trust and the
Secretary of the Treasury, shall enter into an arrangement with
a nongovernmental financial institution to serve as disbursing
agent for benefits payable under this Act who shall disburse
consolidated benefits under this Act to each recipient.
(B) The Board shall from time to time certify--
(i) to the Secretary of the Treasury the amounts
required to be transferred from the Social Security
Equivalent Benefit Account and the the Dual Benefits
Payments Account to the disbursing agent to make
payments of benefits and the Secretary of the Treasury
shall transfer those amounts;
(ii) to the Board of Trustees of the Railroad
Retirement Investment Trust the amounts required to be
transferred from the Railroad Retirement Investment
Trust to the disbursing agent to make payments of
benefits and the Board of Trustees shall transfer those
amounts; and
(iii) to the disbursing agent the name and address of
each individual entitled to receive a payment, the
amount of such payment, and the time at which the
payment should be made.
* * * * * * *
(c)(1) Benefit payments determined by the Board to be payable
under this Act shall be made [from the Railroad Retirement
Account] by the disbursing agent under subsection (b)(4) from
money transferred to it from the Railroad Retirement Trust Fund
or the Social Security Equivalent Benefit Account, as the case
may be, except that [payments of supplemental annuities under
section 2(b) of this Act shall be made from the Railroad
Retirement Supplemental Account, and] payments of annuity
amounts made under sections 3(h), 4(e), and 4(h) of this Act
and under sections 204(a)(3), 204(a)(4), 206(3), and 207(3) of
Public Law 93-445 shall be made by the disbursing agent under
subsection (b)(4) from money transferred to it from the Dual
Benefits Payments Account. In any fiscal year, the total
amounts paid under such sections shall not exceed the total
sums appropriated to the Dual Benefits Payments Account for
that fiscal year. The Board shall prescribe regulations for
allocation of annuity amounts which would without regard to
such regulations be payable under sections 3(h), 4(e), and 4(h)
of this Act and sections 204(a)(3), 204(a)(4), 206(3), and
207(3) of Public Law 93-445 so that the sums appropriated to
the Dual Benefits Payments Account for a fiscal year so far as
practicable, are expended in equal monthly installments
throughout such fiscal year, and aredistributed so that
recipients are paid annuity amounts which bear the same ratio to the
annuity amounts such recipients would have received but for such
regulations as the ratio of the total sums appropriated to pay such
annuity amounts bear to the total sums necessary to pay such annuity
amounts without regard to such regulations. Notwithstanding any other
provision of law, the entitlement of an individual to an annuity amount
under section 3(h), 4(e), or 4(h) of this Act or section 204(a)(3),
204(a)(4), 206(3), or 207(3) of Public Law 93-445 for any month in
which the amount payable to such individual is allocated under the
regulations prescribed by the Board under this subsection shall not
exceed the amount so allocated for that month to such individual.
* * * * * * *
railroad retirement account
Sec. 15. (a) The Railroad Retirement Account established by
section 15(a) of the Railroad Retirement Act of 1937 shall
continue to be maintained in the Treasury of the United States.
There is hereby appropriated to such Account for each fiscal
year, beginning with the fiscal year ending June 30, 1975, to
provide for the payment of benefits to be made from such
Account in accordance with the provisions of section 7(c)(1) of
this Act, and to provide for expenses necessary for the Board
in the administration of all provisions of this Act, an amount
equal to amounts covered into the Treasury (minus refunds)
during each fiscal year under the Railroad Retirement Tax Act[,
except those portions of the amounts covered into the Treasury
under sections 3211(b), 3221(c), and 3221(d) of such Tax Act as
are necessary to provide sufficient funds to meet the
obligation to pay supplemental annuities at the level provided
under section 3(e) of this Act and, with respect to those
entitled to supplemental annuities under section 205(a) of
title II of this Act, at the level provided under section
205(a). The Board is directed to determine what portion of the
taxes collected under sections 3211(b), 3221(c), and 3221(d) of
the Railroad Retirement Tax Act is to be credited to the
Railroad Retirement Account pursuant to the preceding
provisions of this subsection and what portion of such taxes is
to be credited to the Railroad Retirement Supplemental Account
pursuant to the provisions of subsection (c) of this section.
The Board shall make such a determination with respect to each
calendar quarter commencing with the quarter beginning January
1, 1975, shall make each such determination not later than
fifteen days before each calendar quarter, and shall, as soon
as practicable after each such determination, advise the
Secretary of the Treasury of the determination made. The
Secretary of the Treasury shall credit the amounts covered into
the Treasury under sections 3211(b), 3221(c), and 3221(d) of
the Railroad Retirement Tax Act to the Railroad Retirement
Account and the Railroad Retirement Supplemental Account in
such proportions as is determined by the Board pursuant to the
provisions of this subsection].
* * * * * * *
[(c) The Railroad Retirement Supplemental Account established
by section 15(b) of the Railroad Retirement Act of 1937 shall
continue to be maintained in the Treasury of the United States.
There is hereby appropriated to such account for each fiscal
year, beginning with the fiscal year ending June 30, 1975, out
of any moneys in the Treasury not otherwise appropriated, to
provide for the payment of supplemental annuities under section
2(b) of this Act, and to provide for the expenses necessary for
the Board in the administration of the payment of such
supplemental annuities, an amount equal to such portions of the
amounts covered into the Treasury (minus refunds) during each
fiscal year under sections 3211(b), 3221(c), and 3221(d) of the
Railroad Retirement Tax Act as are not appropriated to the
Railroad Retirement Account pursuant to the provisions of
subsection (a) of this section. Whenever the Board finds at any
time that the balance in the Railroad Retirement Supplemental
Account will be insufficient to pay the supplemental annuities
which it estimates are due, or will become due, under section
2(b) of this Act, it shall request the Secretary of the
Treasury to transfer from the Railroad Retirement Account to
the credit of the Railroad Retirement Supplemental Account such
moneys as the Board estimates would be necessary for the
payment of such supplemental annuities, and the Secretary shall
make such transfer. Whenever the Board finds that the balance
in the Railroad Retirement Supplemental Account, without regard
to the amounts transferred pursuant to the next preceding
sentence, is sufficient to pay such supplemental annuities, it
shall request the Secretary of the Treasury to retransfer from
the Railroad Retirement Supplemental Account to the credit of
the Railroad Retirement Account such moneys as in its judgment
are not needed for the payment of such supplemental annuities,
plus interest at an annual rate equal to the average rate of
interest borne by all special obligations held by the Railroad
Retirement Account on the last day of the preceding fiscal
year, rounded to the nearest multiple of one-eight of 1 per
centum, and the Secretary shall make such retransfer.]
(d)(1) There is hereby created an account in the Treasury of
the United States to be known as the Dual Benefits Payments
Account. There is hereby authorized to be appropriated to such
account for each fiscal year beginning with the fiscal year
ending September 30, 1982, such sums as are necessary to pay
during such fiscal year the amounts of annuities estimated by
the Board to be paid under sections 3(h), 4(e), and 4(h) of
this Act and under sections 204(a)(3), 204(a)(4), 206(3), and
207(3) of Public Law 93-445. Not more than 30 days prior to
each fiscal year beginning with the fiscal year ending
September 30, 1982, the Board may request the Secretary of the
Treasury to transfer from the Railroad Retirement Account to
the credit of the Dual Benefits Payments Account any amount not
exceeding the amount that the Board estimates will be necessary
to pay on the first day of the next succeeding month the
annuity amounts under sections 3(h), 4(e), and 4(h) of this Act
and under sections 204(a)(3), 204(a)(4), 206(3), and 207(3) of
Public Law 93-445, taking into account any reduction in such
annuity amounts as determined under section 7(c)(1) of this
Act, and the Secretary of the Treasury shall make such
transfer, but at no time shall the total amount of money
outstanding to the Dual Benefits Payments Account from the
Railroad Retirement Account exceed the amount necessary to pay
the annuity amounts under sections 3(h), 4(e), and 4(h) of this
Act and sections 204(a)(3), 204(a)(4), 206(3), and 207(3) of
Public Law 93-445 for one month. Not more than 10 days after
the funds appropriated to the Dual Benefits Payments Account
for each such fiscal year are received into such Account, the
Board shall request the Secretary of the Treasury to retransfer
from the Dual Benefits Payments Account to the credit of the
Railroad Retirement Account an amount equal to the amount
transferred to the Dual Benefits Payments Account prior to or
during such fiscal year under the preceding sentence, together
with such additional amount determined by the Board to be equal
to the loss of interest to the Railroad Retirement Account
resulting from such transfer, and the Secretary of the Treasury
shall make such retransfer. The Secretary of the Treasury shall
from time to time transfer from the Dual Benefits Payments
Account to the disbursing agent under section 7(b)(4) amounts
necessary to pay benefits payable from that Account.
* * * * * * *
(e) At the request and direction of the Board, it shall be
the duty of the Secretary of the Treasury (hereinafter referred
to as the ``Secretary'') to invest such portion of the amounts
credited to the Railroad Retirement Account[, the Dual Benefits
Payments Account and the Railroad Retirement Supplemental
Account as, in the judgment of the Board, is not immediately
required for the payment of annuities, supplemental annuities,
and death benefits. Such investments may be made only] and the
Dual Benefits Payments Account as are not transferred to the
Railroad Retirement Investment Trust as the Board may determine
in interest-bearing obligations of the United States or in
obligations guaranteed as to both principal and interest by the
United States. For such purpose such obligations may be
acquired (A) on original issue at the issue price; or (B) by
purchase of outstanding obligations at the market price. The
purposes for which obligations of the United States may be
issued under [the Second Liberty Bond Act, as amended] chapter
31 of title 31, are hereby extended to authorize the issuance
at par of special obligations exclusively to the accounts. Such
obligations issued for purchase by the accounts shall have
maturities fixed with due regard for the needs of the accounts,
and shall bear interest at a rate equal to the average market
yield, computed as of the end of the calendar month next
preceding the date of such issue, borne by all marketable
interest-bearing notes of the United States then forming a part
of the public debt that are not due or callable until after the
expiration of three years from the end of such calendar month,
except that where such rate is not a multiple of one-eighth of
1 per centum, the rate of interest on such obligations shall be
the multiple of one-eighth of 1 per centum nearest such rate:
Provided, That the rate of interest on such obligations shall
in no case be less than 3 per centum per annum. At the request
of the Board the Secretary shall purchase other interest-
bearing obligations of the United States, or obligations
guaranteed as to both principal and interest by the United
States, or other obligations which are lawful investments for
trust funds of the United States, on original issue or at the
market price: Provided, That the interest yield of such
obligations shall not be less than the interest rate determined
in accordance with the preceding sentence. At the requestof the
Board, the Secretary shall sell at the market price such obligations in
the accounts (other than special obligations issued exclusively to the
accounts) as the Board designates. The Board shall from time to time
request the Secretary to redeem such special obligations issued
exclusively to the accounts as the Board designates and upon such
request the Secretary shall redeem such obligations at par plus accrued
interest. All requests of the Board to the Secretary, provided for in
this subsection, shall be mandatory upon the Secretary. It shall be the
duty of the Board to determine at all times what proportion of the
accounts shall be invested in other than special obligations issued to
the accounts and further to determine which of such obligations
available to the accounts consistent with [the foregoing requirements]
the requirements of this subsection will provide the greatest rate of
return on the funds invested.
* * * * * * *
(j) Railroad Retirement Investment Trust.--
(1) Establishment.--The Railroad Retirement
Investment Trust (hereinafter in this subsection
referred to as the ``Trust'') is hereby established.
The Trust shall manage and invest the assets of the
Railroad Retirement Trust Fund (hereinafter in this
section referred to as the Fund'', which is hereby
established as a trust organized in the District of
Columbia and shall, to the extent not inconsistent with
this Act, be subject to the laws of the District of
Columbia applicable to such trusts.
(2) Not a federal agency or instrumentality.--The
Trust is not a department, agency, or instrumentality
of the Government of the United States and shall not be
subject to title 31, United States Code.
(3) Board of trustees.--
(A) Generally.--The Trust shall have a Board
of Trustees, consisting of 7 members, each
appointed by a unanimous vote of the Railroad
Retirement Board. The Railroad Retirement Board
may remove any member so appointed by unanimous
vote. Of the 7 members, 3 shall represent the
interests of labor, 3 shall represent the
interests of management, and 1 shall represent
the interests of the general public. The
members of the Board of Trustees shall not be
considered officers or employees of the
Government of the United States.
(B) Qualifications.--Members of the Board of
Trustees shall be appointed only from among
persons who have experience and expertise in
the management of financial investments and
pension plans. No member of the Railroad
Retirement Board shall be eligible to be a
member of the Board of Trustees.
(C) Terms.--Except as provided in this
subparagraph, each member shall be appointed
for a 3-year term. The initial members
appointed under this paragraph shall be divided
into 3 equal groups so nearly as may be, of
which one group will be appointed for a 1-year
term, one for a 2-year term, and one for a 3-
year term. A vacancy in the Board of Trustees
shall not affect the powers of the Board of
Trustees and shall be filled in the same manner
as the selection of the member whose departure
caused the vacancy. Upon the expiration of a
term of a member of the Board of Trustees, that
member shall continue to serve until a
successor is appointed.
(4) Powers of the board of trustees.--The Board of
Trustees shall--
(A) retain independent advisers to assist it
in the formulation and adoption of its
investment guidelines;
(B) retain independent investment managers to
invest the assets of the Fund in a manner
consistent with such investment guidelines;
(C) invest assets in the Fund, pursuant to
the policies adopted in subparagraph (A);
(D) pay administrative expenses of the Fund
and the Trust from the money in the Fund; and
(E) transfer money to the disbursing agent to
pay benefits payable under this Act from money
in the Fund and administrative expenses related
to those benefits.
(5) Reporting requirements and fiduciary standards.--
The following reporting requirements and fiduciary
standards shall apply with respect to the Railroad
Retirement Trust and the Railroad Retirement Trust Fund
(and the assets held in such Trust Fund):
(A) Duties of the board of trustees.--The
Railroad Retirement Trust and each member of
the Board of Trustees shall discharge their
duties with respect to the assets of the Fund
solely in the interest of the Railroad
Retirement Board and through it, the
participants and beneficiaries of the programs
funded under this Act--
(i) for the exclusive purpose of--
(I) providing benefits to
participants and their
beneficiaries; and
(II) defraying reasonable
expenses of administering the
functions of the Trust;
(ii) with the care, skill, prudence,
and diligence under the circumstances
then prevailing that a prudent person
acting in a like capacity and familiar
with such matters would use in the
conduct of an enterprise of a like
character and with like aims;
(iii) by diversifying investments so
as to minimize the risk of large
losses, unless under the circumstances
it is clearly prudent not to do so; and
(iv) in accordance with Trust
governing documents and instruments
insofar as such documents and
instruments are consistent with this
Act.
(B) Prohibitions with respect to members of
the board of trustees.--No member of the Board
of Trustees shall--
(i) deal with the assets of the Fund
in the trustee's own interest or for
the trustee's own account;
(ii) in an individual or in any other
capacity act in any transaction
involving the assets of the Fund on
behalf of a party (or represent a
party) whose interests are adverse to
the interests of the Trust, the Fund,
the Railroad Retirement Board, or the
interests of participants or
beneficiaries; or
(iii) receive any consideration for
the trustee's own personal account from
any party dealing with the assets of
the Fund.
(C) Exculpatory provisions and insurance.--
Any provision in an agreement or instrument
that purports to relieve a trustee from
responsibility or liability for any
responsibility, obligation or duty under this
Act shall be void: Provided, however, That
nothing shall preclude--
(i) the Trust from purchasing
insurance for its trustees or for
itself to cover liability or losses
occurring by reason of the act or
omission of a trustee, if such
insurance permits recourse by the
insurer against the trustee in the case
of a breach of a fiduciary obligation
by such trustee;
(ii) a trustee from purchasing
insurance to cover liability under this
section from and for his own account;
or
(iii) an employer or an employee
organization from purchasing insurance
to cover potential liability of one or
more trustees with respect to their
fiduciary responsibilities,
obligations, and duties under this
section.
(D) Bonding.--Every trustee and every person
who handles funds or other property of the Fund
(hereafter in this subsection referredto as
``Trust official'') shall be bonded in accordance with the following:
(i) The amount of such bond shall be
fixed at the beginning of each fiscal
year of the Trust by the Railroad
Retirement Board. Such amount shall not
be less than 10 percent of the amount
of the funds handled. In no case shall
such bond be less than $1,000 nor more
than $500,000, except that the Railroad
Retirement Board, after consideration
of the record, may prescribe an amount
in excess of $500,000, subject to the
10 per centum limitation of the
preceding sentence.
(ii) It shall be unlawful for any
Trust official to receive, handle,
disburse, or otherwise exercise custody
or control of any of the funds or other
property of the Fund without being
bonded as required by this subsection
and it shall be unlawful for any Trust
official, or any other person having
authority to direct the performance of
such functions, to permit such
functions, or any of them, to be
performed by any Trust official, with
respect to whom the requirements of
this subsection have not been met.
(iii) It shall be unlawful for any
person to procure any bond required by
this subsection from any surety or
other company or through any agent or
broker in whose business operations
such person has any control or
significant financial interest, direct
or indirect.
(E) Audit and report.--
(i) The Trust shall annually engage
an independent qualified public
accountant to audit the financial
statements of the Fund.
(ii) The Trust shall submit an annual
management report to the Congress not
later than 180 days after the end of
the Trust's fiscal year. A management
report under this subsection shall
include--
(I) a statement of financial
position;
(II) a statement of
operations;
(III) a statement of cash
flows;
(IV) a statement on internal
accounting and administrative
control systems;
(V) the report resulting from
an audit of the financial
statements of the Trust
conducted under subparagraph
(E)(i); and
(VI) any other comments and
information necessary to inform
the Congress about the
operations and financial
condition of the Trust and the
Fund.
(iii) The Trust shall provide the
President, the Railroad Retirement
Board, and the Director of the Office
of Management and Budget a copy of the
management report when it is submitted
to Congress.
(F) Enforcement.--The Railroad Retirement
Board may bring a civil action--
(i) to enjoin any act or practice by
the Railroad Retirement Investment
Trust, its Board of Trustees or its
employees or agents that violates any
provision of this Act; or
(ii) to obtain other appropriate
relief to redress such violations, or
to enforce any provisions of this Act.
(6) Rules and administrative powers.--The Board of
Trustees shall have the authority to make rules to
govern its operations, employ professional staff, and
contract with outside advisers to provide legal,
accounting, investment advisory or other services
necessary for the proper administration of this
subsection. In the case of contracts with investment
advisory services, compensation for such services may
be on a fixed contract fee basis or on such other terms
and conditions as are customary for such services.
(7) Quorum.--Five members of the Board of Trustees
constitute a quorum to do business. Investment
guidelines must be adopted by a unanimous vote of the
entire Board of Trustees. All other decisions of the
Board of Trustees shall be decided by a majority vote
of the quorum present. All decisions of the Board of
Trustees shall be entered upon the records of the Board
of Trustees.
(k) Transfers to the Fund.--The Board shall, upon
establishment of the Railroad Retirement Trust Fund and from
time to time thereafter, direct the Secretary of the Treasury
to transfer, in such manner as will maximize the investment
returns to the Railroad Retirement system, that portion of the
Railroad Retirement Account that is not needed to pay current
administrative expenses of the Board to the Railroad Retirement
Trust Fund. The Secretary shall make that transfer.
(l) Railroad Retirement Trust Fund.--The Railroad Retirement
Trust shall from time to time transfer to the disbursing agent
described in section 7(b)(4) such amounts as may be necessary
to pay benefits under this Act (other than benefits paid from
the Social Security Equivalent Benefit Account or the Dual
Benefit Payments Account).
social security equivalent benefit account
Sec. 15A. (a) * * *
* * * * * * *
(c)(1) Except as otherwise provided in this section,
amounts in the Social Security Equivalent Benefit Account shall
be available only for purposes of paying social security
equivalent benefits under this Act and to provide for the
administrative expenses of the Board allocable to social
security equivalent benefits. The Secretary shall from time to
time transfer to the disbursing agent under section 7(b)(4)
amounts necessary to pay those benefits.
* * * * * * *
(d)(1) Whenever the Board finds that the balance in the
Social Security Equivalent Benefit Account will be insufficient
to pay social security equivalent benefits which it estimates
are due in any month, it shall request the Secretary of the
Treasury to transfer from the Railroad Retirement Account to
the credit of the Social Security Equivalent Benefit Account
such moneys as the Board estimates will be necessary for the
payment of such benefits, and the Secretary shall make such
transfer. [Whenever later in such month there is a transfer to
the Social Security Equivalent Benefit Account under paragraph
(2) or (4) of section 7(c) of this Act, the amount so
transferred shall be immediately retransferred to the Railroad
Retirement Account. The amount retransferred under the
preceding sentence shall not exceed the amount of any
outstanding transfers under this paragraph from the Railroad
Retirement Account plus such additional amounts determined by
the Board to be equal to the loss of interest to the Railroad
Retirement Account resulting from such outstanding transfers.]
[(2) Whenever the Board determines that--
[(A) amounts in the Railroad Retirement Account will
not be sufficient to pay the annuities which it
estimates are due, or will become due, from such
Account, and
[(B) the transfer under this paragraph will not
jeopardize the present or future payment of social
security equivalent benefits,
the Board shall request the Secretary of the Treasury to
transfer from the Social Security Equivalent Benefit Account to
the Railroad Retirement Account such moneys as the Board
estimates will be necessary for the payment of such annuities,
and the Secretary shall make such transfer. No transfer under
this paragraph shall be required to be repaid.]
(2) Upon establishment of the Railroad Retirement Trust Fund
and from time to time thereafter, the Board shall direct the
Secretary of the Treasury to transfer, in such manner as will
maximize the investment returns to the Railroad Retirement
system, the balance of the Social Security Equivalent Benefit
Account not needed to pay current benefits required to be paid
from that Account to the Railroad Retirement Trust Fund, and
the Secretary shall make that transfer. Any balance transferred
under this paragraph shall be used by the Railroad Retirement
Trust only to pay benefits under this Act or to purchase
obligations of the United States that are backed by the full
faith and credit of the United States pursuant to chapter 31 of
title 31, United States Code. The proceeds of sales of, and the
interest income from, such obligations shall be used by the
Trust only to pay benefits under this Act.
* * * * * * *
crediting service under the social security act
Sec. 18. (1) Except as provided in subdivision (2), the term
``employment'' as defined in section 210 of the Social Security
Act shall not include service performed by an individual as an
employee as defined in section 1(b) of this Act.
(2) For the purpose of determining (i) monthly insurance
benefits under the Social Security Act to an employee who will
have completed less than ten years of service or less than five
years of service, all of which accrues after December 31, 1995,
and to others deriving from him or her during his or her life
and (ii) monthly insurance benefits and lump-sum death benefits
under such Act with respect to the death of an employee who (A)
will have completed less than ten years of service or less than
five years of service, all of which accrues after December 31,
1995, or (B) will have completed ten or more years of service
or five or more years of service, all of which accrues after
December 31, 1995, but will not have had a current connection
with the railroad industry at the time of his death, and for
the purposes of section 203 and section 216(i) of that Act,
section 210(a)(9) of the Social Security Act and subdivision
(1) of this section shall not operate to exclude from
``employment'' under the Social Security Act service which
would otherwise be included in such ``employment'' but for such
sections. For such purpose, compensation paid in a calendar
year shall, in the absence of evidence to the contrary, be
presumed to have been paid in equal proportions with respect to
all months in the year in which the employee will have been in
service as an employee. In the application of the Social
Security Act pursuant to this subdivision to service as an
employee, all service as defined in section 1(d) of this Act
shall be deemed to have been performed within the United
States.
automatic benefit eligibility requirement adjustments
Sec. 19. (a) * * *
* * * * * * *
(c) If section 226 or title XVII of the Social Security Act
is amended at any time after December 31, 1974, to reduce the
conditions of entitlement to, or to expand the nature of, the
benefits payable thereunder, or if health care benefits in
addition to, or in lieu of, the benefits payable under such
section 226 or such title XVIII are provided by any provision
of law which becomes effective at any time after December 31,
1974, such reductions in the conditions of entitlement to
benefits, such expanded benefits, or such additional,or
substituted, health care benefits shall be available to every employee
(as defined in this Act), and those deriving from him, in the same
manner, and to the same extent, as if his service as an employee after
December 31, 1936, had been included in the term ``employment'' as
defined in the Social Security Act. The Board shall have the same
authority, in accordance with regulations prescribed by it, to
determine the rights of employees who will have completed ten years of
service or five or more years of service, all of which accrues after
December 31, 1995, and of those deriving from such employees, to
benefits provided by reason of the provisions of this subsection as the
Secretary of Health, Education, and Welfare has with respect to
individuals insured under the Social Security Act.
(d) Notwithstanding the provisions of subsections (a), (b),
and (c) of this section--
(1) * * *
(2) No annuity shall be payable to a person by reason
of subsection (a) or (b) of this section unless the
individual upon whose compensation and years of service
such annuity would be based will have (A) completed ten
years of service or five or more years of service, all
of which accrues after December 31, 1995, and (B) in
the case of a survivor, had a current connection with
the railroad industry at the time of his death.
* * * * * * *
benefit preservation
Sec. 22. (a)(1) On or before May 1 of each year beginning
in 1984, the Railroad Retirement Board shall prepare a five-
year projection of anticipated revenues to and payments from
the Railroad Retirement Account to determine the ability of
such Account to pay benefits in each of the next succeeding
five calendar years. On or before May 1 of each year beginning
in 2002, the Railroad Retirement Board shall compute its
projection of the account benefits ratio and the average
account benefits ratio (as defined by section 3241(c) of the
Internal Revenue Code of 1986) for each of the next succeeding
five fiscal years. No later than July 1 of each year, the Board
shall submit a written report to the President, the Speaker of
the House, and the President of the Senate setting forth the
results of [the projection prepared pursuant to the preceding
sentence] the projections prepared pursuant to the preceding
two sentences. If the projection indicates that the funds in
the Railroad Retirement Account will be insufficient to pay the
full amount of the benefits under this Act which are payable
from that Account at any time during the five-year period, the
Board's report shall include--
(A) * * *
* * * * * * *
computation and certification of account benefit ratios
Sec. 23. (a) On or before November 1, 2002, the Railroad
Retirement Board shall--
(1) compute the account benefits ratios for each of
the most recent 10 preceding fiscal years, and
(2) certify the account benefits ratios for each such
fiscal year to the Secretary.
(b) On or before November 1 of each year after 2002, the
Railroad Retirement Board shall--
(1) compute the account benefits ratio for the fiscal
year ending in such year, and
(2) certify the account benefits ratio for such
fiscal year to the Secretary.
(c) Definition.--As used in this section, the term ``account
benefit ratio'' has the meaning given that term in section
3241(c) of the Internal Revenue Code of 1986.
----------
SECTION 205 OF THE SOCIAL SECURITY ACT
evidence, procedure, and certification for payment
Sec. 205. (a) * * *
* * * * * * *
(i) Upon final decision of the Commissioner of Social
Security, or upon final judgment of any court of competent
jurisdiction, that any person is entitled to any payment or
payments under this title, the Commissioner of Social Security
shall certify to the Managing Trustee the name and address of
the person so entitled to receive such payment or payments, the
amount of such payment or payments, and the time at which such
payment or payments should be made, and the Managing Trustee,
through the Fiscal Service of the Department of the Treasury,
and prior to any action thereon by the General Accounting
Office, shall make payment in accordance with the certification
of the Commissioner of Social Security (except that in the case
of (A) an individual who will have completed ten years of
service or five or more years of service, all of which accrues
after December 31, 1995, creditable under the Railroad
Retirement Act of 1937 or the Railroad Retirement Act of 1974,
(B) the wife or husband of such an individual, (C) any survivor
of such an individual if such survivor is entitled, or could
upon application become entitled, to an annuity under section 2
of the Railroad Retirement Act of 1974, and (D) any other
person entitled to benefits under section 202 of this Act on
the basis of the wages and self-employment income of such an
individual (except a survivor of such an individual where such
individual did not have a current connection with the railroad
industry, as defined in the Railroad Retirement Act of 1974, at
the time of his death), such certification shall be made to the
Railroad Retirement Board which shall provide for such payment
or payments to such person on behalf of the Managing Trustee in
accordance with the provisions of the Railroad Retirement Act
of 1974): Provided, That where a review of the Commissioner's
decision is or may be sought under subsection (g) the
Commissioner of Social Security may withhold certification of
payment pending such review. The Managing Trustee shall not be
held personally liable for any payment or payments made in
accordance with a certification by the Commissioner of Social
Security.
* * * * * * *
----------
INTERNAL REVENUE CODE OF 1986
Subtitle A--Income Taxes
* * * * * * *
CHAPTER 1--NORMAL TAXES AND SURTAXES
* * * * * * *
Subchapter A--Determination of Tax Liability
* * * * * * *
PART IV--CREDITS AGAINST TAX
* * * * * * *
Subpart A--Nonrefundable Personal Credits
* * * * * * *
SEC. 24 CHILD TAX CREDIT.
(a) * * *
* * * * * * *
(d) Additional Credit for Families With 3 or More Children.--
(1) * * *
* * * * * * *
(3) Social security taxes.--For purposes of paragraph
(1)--
(A) In general.--The term ``social security
taxes'' means, with respect to any taxpayer for
any taxable year--
(i) * * *
* * * * * * *
(iii) 50 percent of the taxes imposed
by [section 3211(a)(1)] section 3211(a)
on amounts received by the taxpayer
during the calendar year in which the
taxable year begins.
* * * * * * *
Subchapter B--Computation of Taxable Income
* * * * * * *
PART II--ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME
* * * * * * *
SEC. 72. ANNUITIES; CERTAIN PROCEEDS OF ENDOWMENT AND LIFE INSURANCE
CONTRACTS.
(a) * * *
* * * * * * *
(r) Certain Railroad Retirement Benefits Treated as Received
Under Employer Plans.--
(1) * * *
(2) Tier 2 taxes treated as contributions.--
(A) * * *
* * * * * * *
(B) Tier 2 portion.--For purposes of
subparagraph (A)--
(i) After 1984.--With respect to
compensation paid after 1984, the tier
2 portion shall be the taxes imposed by
sections 3201(b), [3211(a)(2)] section
3211(b), and 3221(b).
* * * * * * *
Subchapter F--Exempt Organizations
* * * * * * *
PART I--GENERAL RULE
* * * * * * *
SEC. 501. EXEMPTION FROM TAX ON CORPORATIONS, CERTAIN TRUSTS, ETC.
(a) * * *
* * * * * * *
(c) List of Exempt Organizations.--The following
organizations are referred to in subsection (a):
(1) * * *
* * * * * * *
(28) The Railroad Retirement Investment Trust
established under section 15(j) of the Railroad
Retirement Act of 1974.
* * * * * * *
Subtitle C--Employment Taxes
* * * * * * *
CHAPTER 22--RAILROAD RETIREMENT TAX ACT
* * * * * * *
Subchapter E. Tier 2 tax rate determination.
* * * * * * *
Subchapter A--Tax on Employees
* * * * * * *
SEC. 3201. RATE OF TAX.
(a) * * *
[(b) Tier 2 Tax.--In addition to other taxes, there is
hereby imposed on the income of each employee a tax equal to
4.90 percent of the compensation received during any calendar
year by such employee for services rendered by such employee.]
(b) Tier 2 Tax.--
(1) In general.--In addition to other taxes, there is
hereby imposed on the income of each employee a tax
equal to the applicable percentage of the compensation
received during any calendar year by such employee for
services rendered by such employee.
(2) Applicable percentage.--For purposes of paragraph
(1), the term ``applicable percentage'' means--
(A) 4.90 percent in the case of compensation
received during 2001 or 2002, and
(B) in the case of compensation received
during any calendar year after 2002, the
percentage determined under section 3241 for
such calendar year.
* * * * * * *
Subchapter B--Tax on Employee Representatives
* * * * * * *
SEC. 3211. RATE OF TAX.
[(a) Imposition of Taxes.--
[(1) Tier 1 tax.--In addition to other taxes, there
is hereby imposed on the income of each employee
representative a tax equal to the applicable percentage
of the compensation received during any calendar year
by such employee representative for services rendered
by such employee representative. For purposes of the
preceding sentence, the term ``applicable percentage''
means the percentage equal to the sum of the rates of
tax in effect under subsections (a) and (b) of section
3101 and subsections (a) and (b) of section 3111 for
the calendar year.
[(2) Tier 2 tax.--In addition to other taxes, there
is hereby imposed on the income of each employee
representative a tax equal to the following percentage
of the compensation received during any calendar year
by such employee representatives for services rendered
by such employee representative:
[In the case of compensation
received during: The rate shall be:
1985.................................................... 13.75
1986 or thereafter...................................... 14.75
[(3) Cross reference.--For application of different
contribution bases with respect to the taxes imposed by
paragraphs (1) and (2), see section 3231(e)(2).
[(b) In addition to other taxes, there is hereby imposed on
the income of each employee representative a tax at a rate
equal to the rate of excise tax imposed on every employer,
provided for in section 3221(c), for each man-hour for which
compensation is paid to him for services rendered as an
employee representative.]
(a) Tier 1 Tax.--In addition to other taxes, there is hereby
imposed on the income of each employee representative a tax
equal to the applicable percentage of the compensation received
during any calendar year by such employee representative for
services rendered by such employee representative. For purposes
of the preceding sentence, the term ``applicable percentage''
means the percentage equal to the sum of the rates of tax in
effect under subsections (a) and (b) of section 3101 and
subsections (a) and (b) of section 3111 for the calendar year.
(b) Tier 2 Tax.--
(1) In general.--In addition to other taxes, there is
hereby imposed on the income of each employee
representative a tax equal to the applicable percentage
of the compensation received during any calendar year
by such employee representatives for services rendered
by such employee representative.
(2) Applicable percentage.--For purposes of paragraph
(1), the term ``applicable percentage'' means--
(A) 14.75 percent in the case of compensation
received during 2001,
(B) 14.20 percent in the case of compensation
received during 2002, and
(C) in the case of compensation received
during any calendar year after 2002, the
percentage determined under section 3241 for
such calendar year.
(c) Cross Reference.--
For application of different contribution bases with respect
to the taxes imposed by subsections (a) and (b), see section
3231(e)(2).
* * * * * * *
Subchapter C--Tax on Employers
* * * * * * *
SEC. 3221. RATE OF TAX.
(a) * * *
[(b) Tier 2 Tax.--In addition to other taxes, there is hereby
imposed on every employer an excise tax, with respect to having
individuals in his employ, equal to 16.10 percent of the
compensation paid during any calendar year by such employer for
services rendered to such employer.]
(b) Tier 2 Tax.--
(1) In general.--In addition to other taxes, there is
hereby imposed on every employer an excise tax, with
respect to havingindividuals in his employ, equal to
the applicable percentage of the compensation paid during any calendar
year by such employer for services rendered to such employer.
(2) Applicable percentage.--For purposes of paragraph
(1), the term ``applicable percentage'' means--
(A) 15.6 percent in the case of compensation
paid during 2001,
(B) 14.2 percent in the case of compensation
paid during 2002, and
(C) in the case of compensation paid during
any calendar year after 2002, the percentage
determined under section 3241 for such calendar
year.
[(c) In addition to other taxes, there is hereby imposed on
every employer an excise tax, with respect to having
individuals in his employ, for each man-hour for which
compensation is paid by such employer for services rendered to
him during any calendar quarter, at such rate as will make
available sufficient funds to meet the obligation to pay
supplemental annuities at the level provided under section 3(j)
of the Railroad Retirement Act of 1937 as in effect on December
31, 1974 and administrative expenses in connection therewith.
For the purpose of this subsection, the Railroad Retirement
Board is directed to determine what rate is required for each
calendar quarter. The Railroad Retirement Board shall make the
determinations provided for not later than fifteen days before
each calendar quarter. As soon as practicable after each
determination of the rate, as provided in this subsection, the
Railroad Retirement Board shall publish a notice in the Federal
Register, and shall advise all employers, employee
representatives, and the Secretary, of the rate so determined.
With respect to daily, weekly, or monthly rates of compensation
such tax shall apply to the number of hours comprehended in the
rate together with the number of overtime hours for which
compensation in addition to the daily, weekly, or monthly rate
is paid. With respect to compensation paid on a mileage or
piecework basis such tax shall apply to the number of hours
constituting the hourly equivalent of the compensation paid.
Each employer of employees whose supplemental annuities are
reduced pursuant to section 3(j)(2) of the Railroad Retirement
Act of 1937 or section 2(h)(2) of the Railroad Retirement Act
of 1974 shall be allowed as a credit against the tax imposed by
this subsection an amount equivalent in each month to the
aggregate amount of reductions in supplemental annuities
accruing in such month to employees of such employer. If the
credit so allowed to such an employer for any month exceeds the
tax liability of such employer accruing under this subsection
in such month, the excess may be carried forward for credit
against such taxes accruing in subsequent months but the total
credit allowed by this paragraph to an employer shall not
exceed the total of the taxes on such employer imposed by this
subsection. At the end of each calendar quarter the Railroad
Retirement Board shall certify to the Secretary with respect to
each such employer the amount of credit accruing to such
employer under this paragraph during such quarter and shall
notify such employer as to the amount so certified.
[(d) Notwithstanding the provisions of subsection (c) of this
section, the tax imposed by such subsection (c) shall not apply
to an employer with respect to employees who are covered by a
supplemental pension plan which is established pursuant to an
agreement reached through collective bargaining between the
employer and employees. There is hereby imposed on every such
employer an excise tax equal to the amount of the supplemental
annuity paid to each such employee under section 2(b) of the
Railroad Retirement Act of 1974, plus a percentage thereof
determined by the Railroad Retirement Board to be sufficient to
cover the administrative costs attributable to such payments
under section 2(b) of such Act.]
* * * * * * *
Subchapter D--General Provisions
* * * * * * *
SEC. 3231. DEFINITIONS.
(a) * * *
* * * * * * *
(e) Compensation.--For purposes of this chapter--
(1) * * *
(2) Application of contribution bases.--
(A) Compensation in excess of applicable base
excluded.--
(i) * * *
* * * * * * *
(iii) Hospital insurance taxes.--
Clause (i) shall not apply to--
(I) so much of the rate
applicable under section
3201(a) or 3221(a) as does not
exceed the rate of tax in
effect under section 3101(b),
and
(II) so much of the rate
applicable under section
[3211(a)(1)] 3211(a) as does
not exceed the rate of tax in
effect under section 1401(b).
* * * * * * *
(B) Applicable Base.--
(i) Tier 2 taxes, etc.--For purposes
of--
(I) the taxes imposed by
sections 3201(b), [3211(a)(2)]
3211(b), and 3221(b), and
* * * * * * *
(4)(A) For purposes of applying sections 3201(a),
[3211(a)(1)] 3211(a), and 3221(a), in the case of
payments made to an employee or any of his dependents
on account of sickness or accident disability, clause
(i) of the second sentence of paragraph (1) shall
exclude from the term ``compensation'' only--
(i) payments which are received under a
workmen's compensation law, and
(ii) benefits received under the Railroad
Retirement Act of 1974.
* * * * * * *
Subchapter E--Tier 2 Tax Rate Determination
Sec. 3241. Determination of tier 2 tax rate based on average
account benefits ratio.
SEC. 3241. DETERMINATION OF TIER 2 TAX RATE BASED ON AVERAGE ACCOUNT
BENEFITS RATIO.
(a) In General.--For purposes of sections 3201(b), 3211(b),
and 3221(b), the applicable percentage for any calendar year is
the percentage determined in accordance with the table in
subsection (b).
(b) Tax Rate Schedule.--
------------------------------------------------------------------------
Average account benefits ratio Applicable
----------------------------------- percentage for Applicable
sections 3211(b) percentage for
At least But less than and 3221(b) section 3201(b)
------------------------------------------------------------------------
2.5 22.1 4.9
2.5 3.0 18.1 4.9
3.0 3.5 15.1 4.9
3.5 4.0 14.1 4.9
4.0 6.1 13.1 4.9
6.1 6.5 12.6 4.4
6.5 7.0 12.1 3.9
7.0 7.5 11.6 3.4
7.5 8.0 11.1 2.9
8.0 8.5 10.1 1.9
8.5 9.0 9.1 0.9
9.0 8.2 0
------------------------------------------------------------------------
(c) Definitions Related to Determination of Rates of Tax.--
(1) Average account benefits ratio.--For purposes of
this section, the term ``average account benefits
ratio'' means, with respect to any calendar year, the
average determined by the Secretary of the account
benefits ratios for the 10 most recent fiscal years
ending before such calendar year. If the amount
determined under the preceding sentence is not a
multiple of 0.1, such amount shall be increased to the
next highest multiple of 0.1.
(2) Account benefits ratio.--For purposes of this
section, the term ``account benefits ratio'' means,
with respect to any fiscal year, the amount determined
by the Railroad Retirement Board by dividing the fair
market value of the assets in the Railroad Retirement
Account and of the Railroad Retirement Investment Trust
(and for years before 2001, the Social Security
Equivalent Benefits Account) as of the close of such
fiscal year by the total benefits and administrative
expenses paid from the Railroad Retirement Account and
the Railroad Retirement Investment Trust during such
fiscal year.
(d) Notice.--No later than December 1 of each calendar year,
the Secretary shall publish a notice in the Federal Register of
the rates of tax determined under this section which are
applicable for the following calendar year.
* * * * * * *