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Includes capital outlay as follows: 1965, $14,000; 1966, $17,000; 1967, $17,000. 2 Selected resources as of June 30 are as follows: Unpaid undelivered orders, 1964, $13,000; 1965, $10,000; 1966, $10,000; 1967, $10,000.

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Mr. FOGARTY. We shall hear next the Railroad Retirement Board. (The statement follows:)

Mr. Chairman and members of the committee, the Railroad Retirement Board administers the Railroad Retirement Act and the Railroad Unemployment Insurance Act. One act provides a system for the payment of annuities for age and disability and survivor benefits. The other act provides a system for the payment of unemployment, maternity, and sickness benefits to qualified railroad workers, and an employment service for placing unemployment benefit claimants in jobs. Also, the 1965 amendments to the Social Security and Railroad Retirement Acts require that the Board participate in the administration of the hospital and medical insurance programs for persons covered by the Railroad Retirement Act.

Organizational structure of the Railroad Retirement Board

The Board is composed of three members appointed by the President, by and with the advice and consent of the Senate one upon the recommendation of representatives of employees, one upon recommendation of representatives of carriers, and one, the Chairman, without designated recommendation. The Board's administrative organization is designed to integrate the administration of the programs conducted by the Board without duplication of facilities or operations.

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Means of financing

The unemployment and sickness insurance system is financed by contributions paid wholly by employers. Of the total contributions paid for this purpose. the portion represented by 0.25 percent of the taxable payroll is permanently appropriated to the Board to cover the administrative costs of the system, with the remainder being credited to the railroad unemployment insurance account in the une nployment trust fund for the payment of benefits.

Under the railroad retirement system, railroad workers and employer: pay taxes on wages to finance the payment of annuities for age and disability and benefits for survivors and to finance the cost of hospital insurance benefits established by the 1965 amendments to the Social Security Act. The railroad retirement account is credited with the taxes and annuity payments are made from the account. The amounts needed for administrative expenses, as authorized by Congress in annual appropriation acts, are derived from the account. The portion of the taxes credited to the account which finances hospital insurance benefits is transferred to the Federal hospital insurance trust fund under the financial interchange provisions governing the railroad retirement and social security systems. These financial interchange provisions represent a reinsurance arrangement under which annual financial interchanges are made between the railroad retirement system and the social security system to place these systems in the same position in which they would have been if railroad employment had been included in social security coverage.

Payments to railroad retirement account for military service credits

Railroad workers entering military service may have such service credited toward benefits under the railroad retirement system under certain conditions. An appropriation of $17,201,000 is requested to pay the third of 10 yearly installments on the amount due the railroad retirement account for creditable military service for the period through June 30, 1965.

Summary of requirements for railroad administrative expenses for 1966 and 1967 The appropriation requirements of the railroad retirement system for fiscal year 1966 are $11,725,000. This amount consists of the $10,650,000 regular appropriation for 1966 plus a supplemental appropriation of $850,000 needed for costs of handling work created for the Railroad Retirement Board by the 1965 amendments to the Social Security and Railroad Retirement Acts and a supplemental appropriation of $225,000 for pay act costs. The 1965 amendments provided for the participation of the Board in the administration of the hospital and medical insurance programs for persons covered by the Railroad Retirement Act. The amendments also required the Board to make a large number of changes in benefit rates for individuals covered by the railroad retirement system. The added work for handling by the Board in 1966 includes the establishment of eligibility for hospital insurance and enrollment for medical insurance for 550,000 persons covered by the Railroad Retirement Act, the adjustment of 385,000 benefit rates, and the processing of 17,000 applications from individuals who became newly eligible for benefits as a result of the amendments.

The appropriation requirements of the railroad retirement system for fiscal year 1967 are $11,175,000 which is $550,000 less than total estimated requirements for 1966. The decrease in requirements from 1966 to 1967 results principally from the completion of the nonrecurring portion of the work created by the 1965 amendments. Of course, the amendments created new workloads of a continuing nature which will be for handling in 1967. This work includes the maintenance of the roll of persons eligible for hospital and medical insurance, answering inquiries from the 550,000 individuals covered by the programs, withholding of premiums from monthly benefits, etc. Also, an additional 114,000 benefit rates will be increased in January 1967.

In addition to Mr. Healy, the management member, and Mr. Lyon, the labor member of the Board, we have with us Mr. McKenna, the Chief Executive Officer, and Mr. Rudisin, the Director of Budget and Fiscal Operations, who are prepared to answer questions which the members of the committee may wish to ask.

PAYMENT FOR MILITARY SERVICE CREDITS

Mr. FOGARTY. The request for payment for military service credits is $17,201,000 compared with $16,558,000 appropriated in 1966. Mr. HABERMEYER. Yes, sir.

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Mr. FOGARTY. What accounts for the increase?

Mr. HABERMEYER. That is the method by which we calculate the payments. This is the third installment of 10. You remember 3 years ago we negotiated

Mr. FOGARTY. I thought they were going to be calculated on an equal amount each year.

Mr. HABERMEYER. No.

Mr. FOGARTY. You cannot do that?

Mr. RUDISIN. The Bureau of the Budget preferred this approach, and each of the succeeding installments is somewhat larger than the preceding because of additional interest.

Mr. FOGARTY. The calculations are still based on 10 annual payments?

Mr. HABERMEYER. That is right. This has been completely worked out. In our justification on page 7 we show what the request is this year, what it will be next year, and all the way through the last installment.

SALARIES AND EXPENSES

Mr. FOGARTY. The request for salaries and expenses is $11,175,000, an increase of $525,000 over the appropriation of $10,650,000 for 1966. Most of the increase is for the salary increase enacted last year; is that correct? There are only 11 additional positions requested.

Mr. HABERMEYER. Actually, we are requesting less money than we will spend this year. In other words, our appropriation last year was $10,650,000, but because of the amendments to the Social Security and Railroad Retirement Acts, we are asking for an $850,000 supplemental appropriation plus a $225,000 pay act increase.

Mr. FOGARTY. You do not have that yet.

Mr. HABERMEYER. We do not have that yet; no, sir. This is money we will need in order to get the work done this year.

Mr. FOGARTY. But you are asking for 11 additional positions.
Mr. RUDISIN. Yes, sir.

EFFECT OF 1965 SOCIAL SECURITY AMENDMENTS

Mr. FOGARTY. Are the additional positions all for handling increased work due to the 1965 Social Security Amendments? Mr. HABERMEYER. Yes, sir.

Mr. FOGARTY. How did these amendments affect your work?

Mr. HABERMEYER. First of all, we are made part and parcel of the administration of the medicare program. We, for example, are now enrolling all of the railroad workers who are on our benefit rolls, and also all railroad workers over 65 who are still working in industry and those who have members of their family over 65. We are taking on that enrollment job.

Second, we will continue to have inquiries and answer inquiries and problems that come up among our railroad workers. They come in and ask: "How much more services do I have as far as hospitals are concerned? How much more in the way of nursing homes?"

Then, in addition, we have a few thousand beneficiaries in Canada that we will cover entirely ourselves. This is part of it.

Then the 7-percent increase that was given to all the social security beneficiaries extended itself to our beneficiary rolls to the extent that we have some that are paid under what we call the overall social security minimum formula. In other words, our law says that no railroad worker will get less than 110 percent in benefits if his wage credits had been covered under the social security system. Generally speaking, this formula applies itself to survivors and to short-time railroad workers, railroad workers who have more than 10 and less than 15 years. So, to that extent, we had to make adjustments in our beneficiary rolls, and we had to make some 385,000 such adjustments, increasing benefits.

In addition to that, the Railroad Retirement Act was amended removing the restriction on benefit payments to railroad spouses who also are eligible for social security benefits. We had about 19,000 new spouse applications because of this. In addition, many spouses on the rolls had their benefit rates increased. The number escapes me right now, but I can supply that for the record.

(The information follows:)

Spouses on the rolls whose benefits were increased totaled 110,000.

BACKLOG

Mr. FOGARTY. Have you any abnormal backlogs of work?

Mr. HABERMEYER. We have a backlog a little larger than we would like, but it is only because of this tremendous workload that we just took on because of the passage of amendments. We are quickly working out of it. We do not see it as any problem at all within the next few months.

ACTUARIAL SOUNDNESS OF THE TRUST FUND

Mr. FOGARTY. What is the situation in regard to the actuarial soundness of the trust fund, according to current calculations?

Mr. HABERMEYER. At the present time, we are approximately half a percent deficient from the actuarial standpoint on a longrun basis. This is not regarded too seriously. The actuary says as long as we can stay at around a half percent-he is projecting into perpetuitythis is a tolerable situation and need cause us no great concern at the

moment.

Mr. FOGARTY. Mr. Healy, do you want to say anything?
Mr. HEALY. No. I think the chairman has covered it.

Mr. FOGARTY. Mr. Lyon?

Mr. LYON. Nothing further.

Mr. FOGARTY. Mr. Michel?

ENROLLING RAILROAD WORKERS IN THE MEDICARE PROGRAM

Mr. MICHEL. You say you are enrolling the railroad workers in the social security medicare program.

Mr. HABERMEYER. Yes, sir.

Mr. MICHEL. How do you do that?

Mr. HABERMEYER. First of all, we sent out to all of the people on our rolls an application form for the supplementary benefits. They make an election. They are automatically covered on the basic.

Mr. MICHEL. Is that mailing from the Social Security Administration?

Mr. HABERMEYER. No. We coordinated this. There may have. been some duplication. I am sure there was not too much of that. We coordinated with Social Security so we would handle our people and they would handle the rest.

Mr. MICHEL. Are you getting any better return than they are? Mr. HABERMEYER. I think our returns are about the same. I have some figures here. Of those people on our rolls we have received very good response. About 78 percent of the application forms that we sent out have been returned, and about 87 percent which were returned elected to take the supplemental medical insurance benefits, that $3

a month benefit.

RESPONSE OF THOSE OVER 65 AND STILL WORKING

We are quite disturbed about the ones who are still working. First of all, we are not getting the response back. We have gotten only about 45-percent response from those over age 65 and still working. Mr. FLOOD. The ones who are over 65 and still working?

Mr. HABERMEYER. That is right.

Mr. FLOOD. And you have a lot of them?

Mr. HABERMEYER. Not too many, but we estimate about 30,000 working and about 10,000 wives or others.

Mr. FLOOD. There are more people over 65 with responsible operating jobs on the railroads than about any other industry in the United States.

Mr. HABERMEYER. There has been a tremendous change in that in the last few years. There have been more and more labor negotiated agreements where men retire at 65, and more and more companies are pushing to get the older men out so they can open up jobs for younger men since the industry is shrinking. So, while some few years ago, maybe not more than 7 or 8, we had as many as 90,000 over age 65 working, now we figure we have only about 30,000 in the work force. Of those responding, however, we have a very high proportion electing the supplemental benefits. Ninety-eight percent want the supplemental benefits, a higher percentage than those on the rolls.

I think the difference is that we handled the first group, the 87percent response by mail, and the people still working come into our offices and discuss it with our personnel. I think that is why we are getting a higher percent signing up.

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