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Mr. FLOOD. That is not the reason at all. I know railroaders. My family has had railroaders in it for three generations. I live in the coalfields. I have more railroads going into my congressional district than any place in the United States. Most of them haul coal, not people. Anyhow, the railroads are there. Outside of the postal workers, nobody knows their rights and privileges more thoroughly and completely than a railroader. They sit back in that caboose with a rule book and memorize it like the Bible. So, the fact that they are 65 or retired hasn't a thing to do with it. They are on top of this.

I am worried about the social security people over 65 who are not. I am not worried about a railroader. Mighty few railroaders do not have that rule book thumbed, including social security.

Mr. HABERMEYER. As to those who have not responded, we are going to follow up and send them another notice this month, February. We are going to try to get one last notice to them before the March 31 deadline.

EFFECT OF SOCIAL SECURITY INCREASE

Mr. FLOOD. I am worried about one more thing regarding social security. Congress is waking up this year to find out that in a number of cases under social security we gave this across-the-board increase and we now find in many cases-and I wonder if this includes youwe have cut 6 inches off the bottom of the blanket and sewed it on the top because the blanket was not long enough. A lot of people have lost 50 cents or $1.50 a month because of what we have done. Why we did not know about that or why somebody did not tell us, I do not know, but I never heard it mentioned until after the thing came into effect and I began getting these letters. "I thought you fellows were giving us an increase. I just got clipped by the Department of Public Assistance" or by the VA or somebody. This poor guy wound up $1.49

short.

I did not believe it. I thought this was some poor old guy or woman who did not know what they were talking about. Was I wrong; and were they right. There are a lot of them. Huntley-Brinkley had part of their show the other night on just this thing. This is nationwide and it isn't good. What about your people?

Mr. HABERMEYER. We have some, unfortunately, in that same position.

Mr. FLOOD. What are you recommending?

Mr. HABERMEYER. We have a bill that we are drafting, and our experience has always been if we can get labor and management to agree on a proposal, we have very good success in getting these proposals adopted.

Mr. FLOOD. Do you need law?

Mr. HABERMEYER. Yes. At the present time we are working with the management and labor groups to see if we can get something done to correct this situation. There are not too many, as far as we are concerned, but in this respect even one is too many.

Mr. FLOOD. I can see why there would not be with railroads, but if there is one, that is one too many. That is not what we intended. Mr. HABERMEYER. That is right.

Mr. FOGARTY. Mr. Duncan.

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VETERANS' BENEFITS

Mr. DUNCAN. I think the situation the Congressman is talking about occurs in veterans' cases, more often than not, where we raised the veterans' benefits in anticipation of social security, and they had that increase for a 6- or 7-month period of time and then lost it when the social security increase went through. Is that a similar situation in your organization?

Mr. HABERMEYER. Only to this extent: Our payments are regarded by law as income by the Veterans' Administration, and if our payment would take the veteran over whatever his minimum allowable is, it could affect his veteran's benefit.

Mr. DUNCAN. It is still better as far as your people are concerned? Mr. HABERMEYER. Yes, sir.

Mr. DUNCAN. If I understand it, over the period of the last year they did get a raise, and then a few months later they got a decrease. They still were not down where they started from, but they are unhappy about it, and understandably so.

WIDOW'S BENEFITS

One other problem that I have raised probably as often as any other is that we increased the spouse's benefit under the Railroad Retirement Act, I think, by changing the consideration that you give to other annuity income, but we did nothing for widows.

Mr. HABERMEYER. What happened there, before the amendment was enacted last year, is that if a spouse was entitled to a benefit under social security in her own right, we made a reduction in the amount we would pay her. If she were a spouse under social security and had that same situation, they would pay her the larger of the two benefits. We were treating wives no differently than social security were treating the wives on their rolls.

We removed that restriction. Now a railroad employee's wife can draw a full benefit as well as get the full benefit she worked for and earned under social security.

The Board was opposed to that amendment. I testified against it for 2 years in both the Senate and the House. I made the statement because I thought that railroad wives should be treated no differently than the wives covered by the social security system, and I made the statement at those hearings that if we had money to disburse, the beneficiaries who most need it are the widows.

Mr. DUNCAN. Would we correct that situation if we were to prohibit the consideration of social security benefits in determining the level of Railroad retirement benefits for widows?

Mr. HABERMEYER. No, we do not have that same reduction provision. Our formula is very low as far as widows are concerned. The aged widow is treated the least favorably of any beneficiary we have on the rolls. The big problem, again, gets back to the dollars and cents. We have a system that is supported 50-50, half by payments by railroad labor and half by railroad management. We have a tax rate now that is around 8 percent on the first $550 that the individual earns. That tax rate is scheduled to go somewhat above 10 percent. I do not think we could take the tax rate much higher.

Mr. FLOOD. You started to make a very important observation on the eligibility. You ought to finish that.

Mr. DUNCAN. I was about to ask the question: Most of the widows entitled to railroad retirement are not eligible for social security, anyway, are they?

Mr. HABERMEYER. Many of them are. They could draw benefits in their own right under social security. The only way that would affect the widows is that we have two formulas-one, the railroad retirement formula in our act, and then the overall minimum where we give them 110 percent of what they would get if the husband had been covered by social security. We give them the larger of those two amounts. If she is entitled to an annuity in her own right under social security, then she does not get the 110 percent of the overall minimum formula computation. She gets the railroad retirement formula.

Mr. DUNCAN. But the wife would.

Mr. HABERMEYER. The wife would get both.

Mr. DUNCAN. So we would be treating them both on the same level if we were simply to pass a law that provided you should not take into consideration social security benefits in determining the level of benefits under the Railroad Retirement Act.

Mr. HABERMEYER. Whatever benefits she might have in her own right.

Mr. DUNCAN. That would put them on the same level.

Mr. HABERMEYER. Yes.

Mr. DUNCAN. Are you recommending any such legislation?

Mr. HABERMEYER. No, we are not recommending anything like that

at this time.

Mr. DUNCAN. You referred to 8 percent on the first $550. That is $550 per what?

Mr. HABERMEYER. Per month; $6,600 a year, the same as social security. The tax rate will increase gradually until it will be a little over 10 percent.

BENEFITS OF A RETIRED WIFE WHO BECOMES A WIDOW

Mr. DUNCAN. If a retired railroad worker's wife becomes a widow, does she run

Mr. HABERMEYER. She is guaranteed she will get no less as a widow than she did as a wife.

Mr. DUNCAN. In order to do anything about the widows

Mr. HABERMEYER. Generally speaking, a widow is alone, whereas the wife has the income from the husband. So, they have two benefits coming into the family. When he dies, she has just the one income. In many cases there could be four payments into the family. The husband could be covered by both railroad retirement and social security and get both benefits. The wife could have benefits, getting two checks from us and social security. All of a sudden he dies, and there is only one check, the widow's check.

WOMEN WHO WERE WIDOWS PRIOR TO THE PROGRAM

Mr. DUNCAN. I get more and more mail on women who were widows prior to the program. Are there any alternatives?

Mr. HABERMEYER. The only thing that bothers the Board at the moment, I think, is the economic situation. I do not know where we could get the additional revenue. I do not think we can carry the tax rate any higher on the employees who are working today. This would be a very costly item. There are many aged widows, and to raise their benefits would cost the System a considerable amount of money.

COST OF INCREASING WIDOWS' BENEFITS

Mr. DUNCAN. Have you any idea how much it would cost? You may supply it for the record.

Mr. HABERMEYER. Yes; I think we could. We could show what a 10-percent increase in widows' benefits would cost as far as the fund is concerned, what percent of payrolls, and how many millions of dollars

a year.

Mr. DUNCAN. And the numbers of people who are involved in this, not only the figures you just suggested, but what it would cost to remove the social security limitation as well.

Mr. HABERMEYER. We will furnish a statement for the record on that.

(The requested information follows:)

COST ESTIMATES FOR TWO PROPOSALS TO AMEND THE RAILROAD RETIREMENT Аст

The first proposal is to increase all aged widows' benefits (including those computed under the 110-percent social security guarantee) by 10 percent. This would cost 0.52 percent of taxable payroll, or about $25 million a year on a level basis. As of December 31, 1965, there were 244,000 aged widows on the railroad retirement benefit rolls and they would get an increase averaging about $8 a month.

Under the second proposal, an aged widow's benefit would always be payable under the 110-percent social security formula unless the railroad retirement formula would produce a larger amount. The cost of this proposal would be 0.50 percent of taxable payroll, or $24 million a year on a level basis. At the end of 1965, there were 65,000 widows on the Board's benefit rolls who would be affected by such an amendment and these women would get an average increase of $25.

OTHER SOURCES OF FUNDS

Mr. DUNCAN. Are there any other alternative sources of funds for your program?

One, we

Mr. HABERMEYER. We have two other sources of revenue. have a provision in our law which is referred to as financial interchange. Briefly speaking, that means that the social security system should be no better off and no worse off had there been no railroad retirement system. What we do is compute every year how much railroad workers would have had to pay in social security taxes, and we comput how much social security would have had to pay to railroad beneficiaries. This works out to our advantage. Over the long pull, it will average out to probably as much as 3% percent of payroll, or something like $160 million a year.

Mr. DUNCAN. That is a transfer from social security's trust fund? Mr. HABERMEYER. From the social security fund to us. The current transfers are quite large, over $400 million last year. It will be over $400 million the next year. Then the other source of revenue is the interest on our fund. We have about $4 billion invested in Govern

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ment securities. We are given interest computed on the average that the Government is paying on medium- and long-term obligations, which at the moment is a little over 4 percent. So, those are our sources of revenue. I know of no other revenues that we could tap. Mr. DUNCAN. Is that your entire investment portfolio?

Mr. HABERMEYER. Yes, sir.

Mr. DUNCAN. That is the only thing you are allowed to invest in? Mr. HABERMEYER. We are not allowed any other investment.

Mr. FLOOD. Are you prevented by law from using the fund as a basis of a loan?

Mr. HABERMEYER. Yes, sir. There is one provision where we have loaned money from the retirement fund to support the unemployment fund. That is a specific provision of the law.

Mr. FLOOD. I meant to increase the size of the fund itself by direct loan.

Mr. HABERMEYER. No.

Mr. DUNCAN. The only general fund payment to you is through payments for military service credits. The cost of administration, even, come out of the trust fund.

Mr. HABERMEYER. That is right.

Mr. DUNCAN. I do not think I found the answer. I wish you would find it for us.

Mr. HABERMEYER. I would love to.

Mr. DUNCAN. That is all.

Mr. FOGARTY. Mr. Farnum.

PROCESSING CLAIMS

Mr. FARNUM. Mr. Chairman, I notice that you have, for example, for processing claims in 1966, 836 positions or persons working in this particular area, and I look over here and I find that you reduced this down to 254.7 units per man-year. Is the total number of claims that are processed, 169,000, on a yearly or monthly basis?

Mr. HABERMEYER. They are on a yearly basis.

Mr. FARNUM. If we used the figure of 200 man-days of work per year, that would be about 1.2 per day per individual processing claims, would it not?

Mr. RUDISIN. That is approximately right. That, of course, involves all of the development work in connection with it.

Mr. FARNUM. Explain to me what an individual does in an 8-hour day processing 1.2 claims.

Mr. HABERMEYER. I think you have to understand that the claim usually starts out in the field. A man comes into one of our district offices and he wants to file an application. Our man works with him on the completion of the application. Then we have to see that he furnishes birth evidence. We have to see that he furnishes evidence of his marriage. In many cases if the wife is eligible for benefits we have to get her birth evidence. Once all of the application is filed, it is sent on into Chicago and there it is recorded, put into a file folder, and then we get into computation of how much benefit is payable. This is a more or less simple application that I just referred to.

We have disability cases where we have to have them examined, sometimes as many as four or six times, to come to the final conclusion that the man is or is not disabled. It is quite an involved procedure.

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