17. On page 21, in line 8, change "inthe" to "in the".

18. On page 21, in lines 15 to 16, delete "except in the case of a succeeding benefit year beginning with a day of unemployment, the next preceding", and substitute therefor the following: "in the case of a succeeding benefit year beginning in accordance with the next preceding sentence by reason of sickness, such".

19. On page 22, in line 18, change "A" to "(A)".

20. On page 25, in line 25, strike out the comma after "206". 21. On page 26, in line 19, change "sections" to "section". The amendments above are technical, clerical, or clarifying.

PRINCIPAL PURPOSE OF THE BILL

Title I of the bill provides an increase in railroad retirement benefits for persons who will not receive an increase in either their railroad retirement or social security benefits as a result of the recent amendments to the Social Security Act. This increase, subject to certain offsets explained hereafter, will equal 110 percent of the increases the affected individuals would have received under the Social Security Act had that act been applicable to the railroad service involved rather than the Railroad Retirement Act. Many persons automatically receive increases in railroad retirement benefits when social security benefits increase, because their benefits are computed under the social security formula, which was increased by last years amendments. These individuals are not affected by the bill. All other beneficiaries will receive increases of $10 or more, in the case of retired employees, or $5 or more in the case of wives, widows, parents, and children (before any reductions for early payment of benefits).

Title I also makes certain disabled widows and widowers eligible for benefits, makes certain additional family members eligible for benefits, provides an increase in the credit for future military service, and liberalizes the earnings test for persons eligible for disability annuities, under the Railroad Retirement Act. The cost of these benefits will be financed out of increases in the income of the railroad retirement fund arising out of the recent Social Security Act amendments and will not require a further increase in railroad retirement taxes.

Title II of the bill would increase by $2.50 per day benefits for unemployment and sickness, and would provide some restrictions on eligibility for those benefits.

The bill reflects the terms of an agreement entered into by representatives of railway labor and management and is supported by the administration.

BRIEF EXPLANATION OF THE BILL

TITLE I

There are two formulas for computing annuities under the Railroad Retirement Act, the social security minimum guarantee formula in section 3(e) of act, and the regular formula. The vast majority of survivor annuities and some retirement and spouses' annuities are computed under the formula in section 3(e) which, in effect, provides for payment of 110 percent of the amount which would be payable

under the Social Security Act if the railroad service had been social security employment; and many spouses' annuities would be larger except for a limit to 110 percent of the highest amount that could be paid to anyone as a wife's benefit under the Social Security Act. On the other hand, the vast majority of employee annuities and a significant proportion of aged widows' annuities are computed under the regular railroad retirement formula. The enactment of the 1967 Social Security Amendments will result in increases in the annuities of individuals described in the first sentence above, without the aid of this bill. With respect to the individuals described in the second sentence above, title I of the bill would increase their annuities by an amount approximately equivalent to 110 percent of the dollar amount resulting from the percentage increase in benefits provided by the Social Security Amendments of 1967 under the Social Security Act, subject to certain adjustments which are described below.

The increase in annuity amounts, described in the last sentence above, would relate only to the percentage increase in the amount of social security benefits over the amount payable under the 1965 amendments to the Social Security Act. The reason for this restriction is that higher social security benefits attributable solely to the higher limit on creditable earnings would come about from the increase in the social security earnings base by the Social Security Amendments of 1967 and from the maximum creditable monthly compensation under the Railroad Retirement Act which is automatically increased from $550 to $650 per month by the operation of existing provisions of the Railroad Retirement Act. This increase in the maximum creditable compensation of itself will produce higher annuity amounts for those employees who earn in excess of $550 a month. Further, the 7-percent increase in annuity amounts provided by the 1966 amendments to the Railroad Retirement Act (Public Law 89-699) which do not now apply to monthly compensation over $450 would be made to apply to such monthly compensation.

Where a railroad retirement annuitant is also being paid social security benefits, there would be an offset against the schedule increase in his annuity by the amount of the percentage increase in his social security benefits provided by the Social Security Amendments of 1967; however, before any reduction required for age, there would be an increase of at least $10 a month in employee annuities (and this increase would be in addition to the higher amount payable due to the raise in the compensation limit and to the application of the 7-percent increase in 1966 to compensation above $450), and of at least $5 a month in each spouse and survivor annuity; and these minimum increases would be without regard to the offset for entitlement to social security benefits.

The increases in annuities provided by the bill will be effective beginning with annuities accruing on February 1, 1968.

In the opinion of the Board's Chief Actuary, the bulk of the costs. of the amendments to the Railroad Retirement Act (75 percent) would be offset by the actuarial gains from the 1967 Social Security Amendments. Therefore, the enactment of this title of the bill would not cause a material change in the actuarial condition of the railroad retirement system; it would be nearly the same as it was before the enactment of the Social Security Amendments of 1967.

TITLE II

This title of the bill would eliminate maternity benefits, as such, but with respect to a female employee, a day of sickness would include a day on which, because of pregnancy, miscarriage, or the birth of a child (i) she is unable to work or (ii) working would be injurious to her health.

The amount of compensation to be earned in a base year as a basic qualification for benefits would be increased from $750 to $1,000.

The benefit rate schedule would be revised and the maximum daily benefit rate would be increased from $10.20 to $12.70 for days of unemployment and days of sickness.

Provision would be made for extended sickness benefits, similar to the extended unemployment benefits now available, and for accelerated sickness benefits through possible early beginning of a benefit year with a day of sickness, similar to the possible early beginning of an accelerated benefit year with a day of unemployment as now pro

vided for.

Extended and accelerated sickness benefits would not be paid for days after attainment of age 65. In an accelerated benefit year begun by reason of sickness, attainment of age 65 prior to the beginning of the general benefit year which was accelerated would end all rights to further sickness benefits until the beginning of the general benefit year. This limitation would not deprive any employee of rights he now has to sickness benefits under the present law. It would also have no effect upon his rights to normal, extended, or accelerated unemployment benefits after attainment of age 65.

With respect to every employee who, upon application therefor, would have been entitled to a disability annuity under section 2 of the Railroad Retirement Act for a period which includes days for which extended or accelerated sickness benefits had been paid, there would be transferred from the railroad retirement account to the railroad unemployment insurance account at the close of each fiscal year the amount which would have been paid as such annuity if the employee had applied for it, up to that total amount of all sickness benefits paid him during that fiscal year for days for which the disability annuity could have accrued. Provision is made for interest on the amount transferred from the close of the fiscal year to the date of certification on the amount for transfer.

An additional disqualifying condition would be added, with the effect that an employee who has been paid a separation allowance would not receive any unemployment or sickness benefits for a period following his separation from service; the length of the period is determined by a formula taking into account the amount of his separation allowance, his last daily rate of pay, and his normal workweek. The amendments proposed by this title of the bill to the Railroad Unemployment Insurance Act would not require an increase in the contribution base or the contribution rate.

EXPLANATION OF THE AMENDMENTS

TITLE I-AMENDMENTS TO THE RAILROAD RETIREMENT ACT

The amendments to the Railroad Retirement Act proposed by title I of the bill have their origin in congressional enactments of 1965, 1966, and 1967, as follows:

(1) The Social Security Amendments of 1965 (Public Law 89-97, approved July 30, 1965) increased benefits under the Social Security Act by 7 percent. Although these same amendments increased the maximum annual creditable and taxable wage base for the Social Security Act from $4,800 to $6,600 (the equivalent of an increase from the old maximum average monthly wage of $400 a month to a new maximum average monthly wage of $550), the 7-percent increase in the benefit formula was limited to the part of the benefit based on the first $400 of an individual's average monthly wage (the former maximum);

(2) The 1965 amendments to the Railroad Retirement Act (Public Law 89-212, approved September 29, 1965) made the railroad retirement creditable and taxable monthly compensation base one-twelfth of the social security annual limit and had the effect of increasing the maximum creditable compensation from $450 to $550 per month; and the 1966 amendments to the Railroad Retirement Act (Public Law 89-699, approved October 30, 1966) also increased annuities by 7 percent, but (as in the case of the 7-percent increase in the social security benefits) limited such increase to the part of the annuity based on the first $450 of an individual's monthly compensation (the former maximum);

(3) The 7-percent increase in annuities was achieved by increasing by 7 percent the factors in the formula in section 3(a) of the Railroad Retirement Act for computing an annuity (3.35 percent of the first $50 of the monthly compensation was increased to 3.58 percent, 2.51 percent of the next $100 was increased to 2.69 percent, and 1.67 percent of the next $300 was increased to 1.79 percent). The limitation of the 7-percent increase to the part of the annuity based on the first $450 of an individual's monthly compensation was achieved by adding the former 1.67-percent factor to the remainder of the monthly compensation over $450 as a fourth factor (the effect of this is to limit the application of the increased factors to the first $450 of the individual's monthly compensation);

(4) In cases where individuals are entitled to benefits under the Social Security Act, the 7-percent increase in their railroad retirement annuities is subject to a reduction by the amount of the 7-percent increase in benefits under the 1965 Social Security Amendments. The amount of the reduction is obtained by multiplying the social security benefit, as increased, by 6.55 percent;1 (5) The 7-percent increase in annuity is not payable, however, if the individual is entitled to a supplemental annuity under section (3(j) of the act as provided for in the same 1966 amendments to the Railroad Retirement Act; but if the amount of the supplemental annuity is less than the individual would receive as a

1 For example, if the individual's social security benefit of $100 was increased by 7 percent to $107, the offset against the increase of the annuity is by $7 ($107 times 6.55 percent equals $7.0085).

7-percent increase in his regular annuity, the 7-percent incre in the regular annuity is reduced by the amount of his supp mental annuity;

(6) There is an overall guarantee that in no case would the reg lar annuity be less in amount than it would have been if the 19 amendments to the Railroad Retirement Act had not been e acted; and

(7) The 1967 amendments to the Social Security Act provid (a) An across-the-board increase in benefits of 13 percer with a minimum primary insurance amount of $55;

(b) An increase in the earnings base from $6,600 to $7,80 beginning in 1968;

(c) An increase in the amount an individual may earn with out losing benefits, and other favorable changes in the pr visions requiring a loss of benefits because of earning (d) New guidelines for determining when an individual is s disabled as to qualify for benefits;

(e) An alternative insured-status test for individuals di abled before age 31;

(f) Monthly cash benefits for disabled widows and disable dependent widowers after age 50 on a reduced basis;

(g) A new definition of dependency for a child on hi mother;

(h) Additional wage credits for military service; and (i) Other improvements in the social security cash benefit and health insurance programs.

The cost of the changes in the Social Security Act would be financed through an increase in the earnings base from $6,600 to $7,800, after 1967, and a small increase in the tax rates, as shown in the table below

1 The hospital insurance tax rate would increase to 1.4 percent 1976-79 and to 1.6 percent 1980-86.

PRINCIPAL AUTOMATIC EFFECTS ON THE RAILROAD RETIREMENT SYSTEM OF THE 1967 AMENDMENTS TO THE SOCIAL SECURITY ACT

Those annuities which are payable under the special social security minimum guarantee of the Railroad Retirement Act will be automatically increased as a result of the social security amendments. The slight increase in tax rates for the social security system will auto