89TH CONGRESS 1ST SESSION

S. 2579

IN THE SENATE OF THE UNITED STATES

SEPTEMBER 30, 1965

Mr. JAVITS (for himself and Mr. HARTKE) introduced the following bill; which was read twice and referred to the Committee on Labor and Public Welfare

A BILL

To amend section 5 (1) of the Railroad Retirement Act of 1937 to provide benefits for children of deceased railroad employees who are over the age of eighteen and below the age of twenty-two and are attending an educational institution as full-time students.

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Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 3 That (a) section 5 (1) (1) (ii) of the Railroad Retirement 4 Act of 1937 is amended by striking out "and shall be less 5 than eighteen years of age, or shall have a permanent physi6 cal or mental condition which is such that he is unable to

7 engage in any regular employment: Provided, That such

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1 disability began before the child attains age eighteen; and"

2 and inserting in lieu thereof the following: "and

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"(A) shall be less than eighteen years of age; or

"(B) shall be less than twenty-two years of age

and a full-time student at an educational institution (as determined under standards and requirements prescribed by the Board); or

"(C) shall, without regard to his age, be unable to engage in any regular employment by reason of a per

manent physical or mental condition which began before the child attained age eighteen; and".

(b) (1) The first sentence of section 5 (b) of such 13 Act is amended by striking out "employee entitled to receive an annuity" and inserting in lieu thereof "employee, which 15 child is (without regard to the provisions of subsection

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(1) (1) (ii) (B)) entitled to receive an annuity".

(2) The second sentence of such section 5(b) is 18 amended by striking out "no child of the deceased employee 19 is entitled" and inserting in lieu thereof "no child of the 20 deceased employee is, or would be (except for the provisions of subsection (1) (1) (ii) (B)), entitled".

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SEC. 2. The amendment made by the first section of 23 this Act shall apply only with respect to annuities accruing

24 for months after the month in which this Act is enacted.

Hon. LISTER HILL,

EXECUTIVE OFFICE OF THE PRESIDENT,

BUREAU OF THE BUDGET, Washington, D.C., May 6, 1966.

Chairman, Committee on Labor and Public Welfare, United States Senate, 4230 New Senate Office Building, Washington, D.C.

DEAR MR. CHAIRMAN: This is in response to your request for the views of the Bureau of the Budget on H. 3274, a bill "To amend the Railroad Retirement Act of 1937, the Railroad Unemployment Insurance Act, and the Railroad Retirement Tax Act to make certain technical changes, to provide for survivor benefits to children ages 18-21, inclusive, and for other purposes.'

The Bureau of the Budget would have no objection to enactment of S. 3274. Sincerely yours,

(Signed)

WILFRED H. ROMMEL,
Acting Assistant Director
(For Legislative Reference).

Senator PELL. I have been asked by the Railroad Retirement Board to offer for the record a few technical changes which will not add cost, but will avoid new technical difficulties. These are:

1. On page 1, strike out line 5.

2. On page 5, in line 21, strike out the word "annuities" and insert "benefits"; in line 22, after the word "disappeared" insert "and to have been completely insured"; in line 24, strike out "annuity" and insert "benefits"; and in line 25, strike out "amounts" and "as a widow's annuity".

3. On page 18, strike out lines 11, 12, 13, 14, and 15, and insert "be effective with respect to months after the month in which this Act is enacted."

(4) Page 20, strike out lines 9 and 10 and insert in lieu thereof the following: "Shall be effective with respect to annuities for months after the month of enactment of this Act. No lump-sum benefit under section 5(f) (2) of the Railroad Retirement Act of 1937 shall be awarded after the date of enactment of this Act in any case in which an individual survives who would be entitled to an annuity under the amendment made by this section unless such individual executes an election in accordance with such section 5(f)(2) before attainment of age 60 to have such benefit paid in lieu of other benefits."

We will now hear from my colleague, Senator Jacob K. Javits from New York.

STATEMENT OF HON. JACOB K. JAVITS, A U.S. SENATOR FROM THE STATE OF NEW YORK

Senator JAVITS. I appreciate having the opportunity to sit with this subcommittee as we consider proposed amendments to the Railroad Retirement Act. Although I am not a member of this subcommittee, I have an interest, as ranking minority member of the full Committee on Labor and Public Welfare, in the work which this subcommittee is performing.

In addition, last September 30, I introduced a bill, S. 2579, which is one of the bills we are considering here, and which would amend the act to provide benefits for children of deceased railroad employees who are between the ages of 18 and 22 and are attending an educational institution as full-time students.

As long ago as 1963, I originated a similar proposal under social security when I introduced S. 1770 in the 88th Congress and this proposal was ultimately adopted as section 306 of the medicare and social security amendments, Public Law 89-97, enacted in July 1965.

I have continued to work to provide this sort of benefit to all employees, having introduced the first of the five Senate bills which would extend these benefits to the railroad industry.

It was a source of considerable satisfaction for me to learn that the Railroad Retirement Board has expressed approval of the substance of my bill in its letter to the chairman of this committee dated December 2, 1965, and that the other interested agencies of the Government have followed suit. It is likewise gratifying to see that so many other bills have since been introduced by my colleagues incorporating the substance of S. 2579, including S. 3274, the bill introduced by Senator Pell, the distinguished chairman of this subcommittee.

I congratulate the chairman and members of this subcommittee and I am confident that these hearings will produce a good bill which will merit the support of the Congress.

Thank you very much, Mr. Chairman.

Senator PELL. Thank you very much, Senator Javits, for that fine

statement.

Our next witness will be Mr. Howard W. Habermeyer, chairman of the Railroad Retirement Board.

STATEMENT OF HOWARD W. HABERMEYER, CHAIRMAN, RAILROAD RETIREMENT BOARD

Mr. HABERMEYER. Mr. Chairman and members of the subcommittee:

My name is Howard W. Habermeyer, and I am Chairman of the Railroad Retirement board. I have been associated with the Board since May 1936, and I have been chairman of the Board since November 1956.

I appear here in behalf of the Board in support of the bill S. 3274. In fact, the introduction of this bill was pursuant to the Board's proposal to the President pro tempore of the Senate on April 4, 1966.

The Board's report on the bill discusses in detail the several provisions of the bill, including the cost of the bill and its effect on the present long-range deficit in the financing of benefits under the railroad retirement system. I shall discuss this deficit problem first because of its importance in the consideration of any bill to amend the Railroad Retirement Act.

We now have a deficit on a long-range actuarial basis in the financing of the railroad retirement system of 0.62 percent of taxable payroll, or $29.8 million a year. It is the Board's practice to oppose legislation which would have the effect of increasing the cost of the system without a provision for revenue to cover the added cost.

As you know, whenever there is an estimated deficit on a long-range actuarial basis in the financing of the railroad retirement system of no more than about 0.50 percent of taxable payroll on a level basis, the system is regarded as in a reasonably sound financial condition. On the estimated taxable payroll of $4.775 billion a year, one-half of 1 percent is about $24 million a year. The present long-range deficit of $29.8 million a year is already above the tolerable one-half of 1 percent by about $5.8 million a year.

The enactment of this bill would increase the present deficit by 0.16 percent of payroll-$7.8 million a year-to a total of 0.78 percent of payroll, or $37.6 million a year, or $13.6 million a year above the one-half of 1 percent.

It is, nevertheless, the opinion of the Board, in view of the relatively small additional cost, that the provisions proposed by the bill, which I shall now discuss, are so meritorious and needed as to warrant their enactment.

In view of the very detailed discussion in the Board's report on the bill, I shall limit my discussion to a few of the more costly provisions in the bill. One of these would provide survivor benefits to children in the ages 18 to 21, inclusive, who are full-time students. This same proposal is contained in numerous bills introduced in the Senate which are pending before your subcommittee. All of them propose the enactment of this provision which is similar to the provision enacted last year by the 1965 amendments to the Social Security Act for such children covered under that act. This amendment, it is estimated, would cost $2.4 million a year on a level basis.

The next costly amendment in the bill relates to the residual lumpsum benefit provision in the Railroad Retirement Act. The Congress enacted such provision in 1937, and with the exception of a few years, this provision remained in the law to date.

In essence, this provision guarantees an employee that the amount of taxes he has paid into the railroad retirement system would never be forfeited; that if he does not receive in benefits an amount sufficient to exceed the employee taxes he has paid, his designee, certain specified survivors, or his estate, will receive a lump-sum benefit. This benefit is equal to the total amount of taxes he paid, plus a slight amount in lieu of interest, but minus other benefits paid on the basis of his service. When the Railroad Retirement Act was amended in 1946 to provide survivor benefits, it was believed that this provision was no longer essential, and it was repealed. The Congress, however, reconsidered the issue, and less than 2 years later reenacted the provision.

The need for this amendment in the bill arises from the fact that under present law the highest factor used in calculating the residual lump sum benefit is 8 percent, which is applicable to compensation on which an employee paid taxes in support of the system after 1961. However, as stated in the Board's report, in view of the tax rates for years after 1967-8.15 percent for 1968, up to 9.35 percent for years after 1972-the maximum factor of 8 percent now applicable in computing this benefit will not be large enough to give full effect to the underlying purpose of the benefit.

As to the years after 1965, the full amount paid by the employee in taxes would be included, and to this amount would be added 0.5 per cent of the taxable compensation. The cost of this amendment is estimated to be $4.3 million a year on a level basis.

The estimated cost of these two amendments is $6.7 million a year on a level basis-$2.4 million for the benefits to school children and $4.3 million for amending the residual lump sum provision. As I shall explain later, all the other substantive amendments will cost an estimated $1.2 million a year on a level basis, but two of the substantive amendments will achieve a savings of $0.1 million a year, leaving a net cost of all the remaining substantive amendments of $1.1 million a year on a level basis.

Although the cost of these remaining amendments is rather small they are nevertheless important. For example, one of them would remove an anomaly in the present law under which a widow may end up receiving no widow's benefits under either the Railroad Retirement