United States Congressional Serial Set

matically result in a similar increase in tax rates for the railroad retirement system (secs. 3201, 3211, and 3221 of the Railroad Retirement Tax Act). The increase in the maximum annual creditable and taxable wage base for social security purposes automatically results in an increase in the maximum monthly creditable and taxable compensation base for railroad retirement purposes (see sec. 3 of Public Law 89-212, approved Sept. 29, 1965), and this also will result in an increase in benefits under the Railroad Retirement Act for employees earning more than $550 a month. The improvements in the hospital insurance program for persons covered under the Social Security Act would automatically result in like improvements for persons covered under the Railroad Retirement Act. The maximum of a spouse's annuity would be increased to not more than $115.50 ($105 plus 10 percent) effective January 1, 1970.

PROPOSALS TO AMEND THE RAILROAD RETIREMENT ACT OF 1937

The bill H.R. 14563

Title I of the bill would amend the Railroad Retirement Act of 1937 as shown below.

(1) Increase in annuities

Annuities would be increased by an amount approximately equal to 110 percent of the dollar amount of the increase resulting from the percentage increase in benefits under the Social Security Amendments of 1967 for corresponding monthly earnings, subject to certain adjustments described below. This increase in annuities would relate only to the percentage increase in the formula for determining the amount of the social security benefit over the corresponding formula under the 1965 amendments to the Social Security Act. Further, this increase in annuities would not take account of the increase in the social security benefit resulting solely from the increase in the social security creditable and taxable wage base because (i) such increase in the wage base automatically results in an equivalent increase in the monthly creditable and taxable compensation base for the Railroad Retirement Act, and this, in turn, will produce an increase in annuities for individuals earning more than the former creditable and taxable maximum of $550 a month, and (ii) otherwise, the increase in annuities would be higher than the financing would permit.2 The increase in annuities, as above stated, would be in addition to the increase resulting from the proposal in this bill to apply the 7-percent increase in benefits provided by the 1966 amendments to the Railroad Retirement Act, to monthly compensation in excess of $450.

? The highest benefit in the 1965 Social Security Act was one based on average earnings of $550. This benefit applied to all individuals whose total earnings averaged $550 or higher. The 1967 Social Security Amendments raised the maximum benefit in two ways: (1) the formula was changed to produce a higher benefit, and (2) the maximum on creditable earnings was raised, which will make possible higher average earnings (up to $650 in the future). Since the regular railroad retirement formula automatically gives an increase for the higher ceiling on creditable earnings, the part of the social security increase resulting from the higher earnings base must be eliminated to avoid duplication of increases. For example, the 1967 social security table provides a full retirement benefit of $204 for average earnings of $600 a month as compared to a maximum of $168 for average earnings of $550 in the 1965 table. The difference is $36 (due to both the change in the formula and the increase in average earnings) which becomes $39.60 when increased by 10 percent. Without a change in formula, the benefit for a $600 average monthly wage would have been $178.70. The difference between $204 and $178.70 is $25.30, and is due to the change in the formula only. Increasing the $25.30 by 10 percent gives $27.83, which is the increase shown in the schedule of section 3(a) (2). The difference between $39.60 and $27.83 is the amount provided by the increase in the earnings limit under the Social Security Act, and duplicates an increase already provided for under the regular railroad retirement formula. Obviously, permitting the duplicate increase for the higher earnings base would cost considerably more money which is not now available.

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

(6) There is an overall guarantee that in no case would the regular annuity be less in amount than it would have been if the 1966 amendments to the Railroad Retirement Act had not been enacted; and

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

(b) An increase in the earnings base from $6,600 to $7,800 beginning in 1968;

(c) An increase in the amount an individual may earn without losing benefits, and other favorable changes in the provisions requiring a loss of benefits because of earnings;

(d) New guidelines for determining when an individual is so disabled as to qualify for benefits;

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

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

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

(h) Additional wage credits for military service; and

(i) Other improvements in the social security cash benefits 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

PROPOSALS TO AMEND THE RAILROAD RETIREMENT ACT OF 1937

The bill H.R. 14563

Title I of the bill would amend the Railroad Retirement Act of 1937 as shown below.

(1) Increase in annuities

2 The highest benefit in the 1965 Social Security Act was one based on average earnings of $550. This benefit applied to all individuals whose total earnings averaged $550 or higher. The 1967 Social Security Amendments raised the maximum benefit in two ways: (1) the formula was changed to produce a higher benefit, and (2) the maximum on creditable earnings was raised, which will make possible higher average earnings (up to $550 in the future). Since the regular railroad retirement formula automatically gives an increase for the higher ceiling on creditable earnings, the part of the social security increase resulting from the higher earings base must be eliminated to avoid duplication of increases. For example, the 1967 social security table provides a full retirement benefit of $204 for average earnings of $600 a month as compared to a maximum of $168 for average earnings of $550 in the 1965 table. The difference is $36 (due to both the change in the formula and the increase in average earnings) which becomes $39.60 when increased by 10 percent. Without a change in formula, the benefit for a $600 average monthly wage would have been $178.70. The difference between $204 and $178.70 is $25.30, and is due to the change in the formula only. Increasing the $25.30 by 10 percent gives $27.83, which is the increase shown in the schedule of section 3(a)(2). The difference between $30.90 and $27.83 is the amount provided by the increase in the earnings limit under the Social Security Act, and duplicates an increase already provided for under the regular railroad retirement formula. Obviously, permitting the duplicate increase for the higher earnings base would cost considerably more money which is not now available.

(2) Removal of the limitation of the 7-percent increase in annuities

The provision which limits the 7-percent increase in annuities in 1966 to the part of the annuity based on the first $450 of an individual's monthly compensation would be changed to make such increase applicable to the individual's entire creditable monthly compensation. (3) Reduction of the increase in annuities

(a) Reduction for entitlement to a supplemental annuity.-There would be no reduction in the increase provided in this bill for the individual's entitlement to a supplemental annuity. However, for administrative reasons, the reduction for the 7 percent 1966 increase in annuities to individuals entitled to supplemental annuities will be made in the schedule increases of section 3(a) (2) rather than in the basic benefit of section 3(a) (1) as is done under the 1966 amendments. Such reduction would be computed by reducing the 1967 increase provided by the proposed new section 3(a)(2) by (i) 6.55 percent of the amount calculated (under the amended sec. 3(a) (1) of the act) on the basis of the first $450 of monthly compensation, or (ii) an amount equal to the supplemental annuity payable, whichever is less.

(b) Reduction for entitlement to a social security benefit.-There would be a reduction of the increase in annuities described in (1) above by the amount of the increase to which the individual would be entitled in benefits under the Social Security Act (other than the increase due to the increase in wage base) by virtue of both the 1965 and 1967 increases. The amount of the reduction would be computed by multiplying the individual's increased social security benefit by 17.3 percent, or, in cases where he is being paid a supplemental annuity, by 11.5 percent. The reason for the 11.5 percent figure is that if he is being paid a supplemental annuity, the reduction for the 7 percent 1966 increase in annuities is being made under the provision explained in item 3(a) so there would be no offset for the 7 percent 1965 increase in his social security benefit under the 1965 amendments and none would be desired under the bill; but there would be an offset for the 13-percent increase of 1967 in his social security benefit, and this offset would be computed by deducting 11.5 percent of the increased social security benefit.3

(c) Reduction on account of age.-All employee annuities under the Railroad Retirement Act (compute as provided in section 3, other than annuities to women age 60 with 30 years of service and annuities based on disability) are reduced on account of age when the annuitant is under age 65 (see sec. 2(a) (3)). Therefore, the increases in annuities (including the minimum increase) provided for by the amendments to section 3 (as well as the adjustments for entitlement to social security benefits) would be before any reduction on account of age. There are specific provisions in this bill for such reductions of spouses' annuities and in the newly provided for survivor annuities on the basis of disability.

3 For example, an individual's social security benefit of $100 was increased, pursuant to the 1965 amendments to the Social Security Act, by 7 percent to $107 ($100 plus $7 equals $107), and the latter amount was increased, pursuant to the 1967 amendments to the Social Security Act, by 13 percent to $121 ($107 plus $13.91 equals approximately $121); $121 times 17.3 percent equals approximately $20.93 ($7 plus $13.91 equals $20.91). Thus, in the above example, to decrease the individual's annuity by the 7 percent of his increased social security benefit of $121, or by $7, multiply $121 by 5.8 percent ($121 times 5.8 percent equals $7.02); and to reduce the increased annuity by the percentage of his increased social security benefit of $121, multiply $121 by 11.5 percent. Thus, 5.8 percent plus 11.5 percent equals 17.3 percent.

(4) Minimum increase in annuities

The current guaranty that in no case shall the annuity be less than it would be if the 1966 amendments to the Railroad Retirement Act had not been enacted would be replaced by a guaranty that in no case would the increase (before any reduction for early retirement or by reason of other benefits based on military service) above the amount that would be payable under the 1966 amendments to the Railroad Retirement Act be less (after applying all the provisions of the bill) than about $10 for an employee annuity or less than about $5 in spouses and survivors' annuities; but the increase in a spouse's annuity would not produce an amount in excess of the applicable maximum in the spouse's annuity payable under the Railroad Retirement Act. Benefits payable under the overall minimum provision of section 3(e) would not be subject to this guaranty so that some of such beneficiaries may not receive increases of as much as $10 in the case of employees and $5 in the case of wives and survivors.

(5) Disability annuities for widows and widowers

Disabled widows and widowers age 50 to 60, would be entitled to annuities, subject to a reduction.

(6) Family relationships

The provisions in the Railroad Retirement Act with regard to the determination of family relationships would be made to accord with current provisions of the Social Security Act.

All of the foregoing provisions would be made applicable to railroad retirement beneficiaries now on the rolls of the Railroad Retirement Board.

(There is no provision in the bill for increasing tax rates under the Railroad Retirement Tax Act. As stated above, the increase in social security tax rates will automatically increase the railroad retirement scheduled tax rates for employees and employers alike by 0.3 percent for 1971-72, by 0.25 percent for 1973-75, by 0.25 percent for 1987 and later, and would also cause the taxable and creditable compensation limit to increase to $650 after 1967. For 1969-70, the rate would be decreased by 0.1 percent.)

AMENDMENTS TO SECTION 3(a) OF THE RAILROAD RETIREMENT ACT

(A) The formula for computing an employee annuity

The removal of the provision which limits the 7-percent 1966 increase to the part of the annuity based on the first $450 a month of an individual's monthly compensation is achieved by eliminating the fourth factor (1.67 percent) from the formula in section 3(a) of the Railroad Retirement Act for computing an employee annuity. (See pars. (1), (2), and (3) under "Background.") The effect of this will be that the 7-percent increase of 1966 will apply to the individual's annuity based on his entire creditable monthly compensation. Since the 7-percent increase (which would now be included in the formula factors applicable to the entire monthly compensation) is (i) subject to an offset for the 7-percent increase in the individual's social security benefit (see par. (4) under "Background"), and (ii) is not payable if the individual is entitled to a supplemental annuity (see par. (5) under "Background"), an adjustment in the increase in annuity will have

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United States Congressional Serial Set, Issue 12795