RAILROAD RETIREMENT BOARD JUSTIFICATION OF ESTIMATES FOR FISCAL YEAR 1967 Authority and purpose SUMMARY AND HIGHLIGHTS 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. 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 unemployment trust fund for the payment of benefits. Under the railroad retirement system, railroad workers and employers 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, 1964. 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 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. Actually, costs of handling work created by the 1965 amendments are expected to amount to $965,000 but it is expected that $115,000 of these costs can be absorbed as a result of savings in other operations, leaving $850,000 of these costs to be financed by a supplemental appropriation. 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. PAYMENT FOR MILITARY SERVICE CREDITS, RAILROAD RETIREMENT BOARD JUSTIFICATION OF ESTIMATES Railroad workers entering military service may have such service credited toward benefits under the railroad retirement system under certain conditions. Under existing law the Government is obligated to pay to the railroad retirement account the additional cost of crediting military service rendered prior to 1937 and used in computing annuities under the Railroad Retirement Act. For military service performed during war-service periods after 1936 and before 1957, the Government is required to pay the combined employer-employee payroll tax on $160 for each month of military service. For service after 1956 and before July 1963, the Government is required to pay the difference between the combined taxes on $160 and the combined social security taxes actually paid with respect to the military service involved. For creditable military service rendered after June 1963, payments are on a cost basis including an overhead factor. An appropriation of $17,201,000 is requested for fiscal year 1967 for payment to the railroad retirement account for military service credits under the Railroad Retirement Act. The appropriation request of $17,201,000 consists of $17,049,000 as the third of 10 yearly installments on the amount due the railroad retirement account for creditable military service for the period through June 30, 1963, plus $152,000 for the additional cost for military service performed before 1937 and used in computing annuities certified in fiscal year 1965. Details regarding the calculation of the amount of the third installment and a schedule of the amounts of the remaining seven installments are given in the following tables. Payment for military service credits-Calculation of 3d installment 1. Appropriation due the Board on July 1, 1964__ 2. Less 1st installment appropriated in fiscal year 1965---. 4. Plus accrued interest on balance for fiscal year 1965_ 6. Less 2d installment appropriated in fiscal year 1966 (% of item 5). 8. Plus accrued interest on balance for fiscal year 1966-- 10. 3d installment for appropriation in fiscal year 1967 (% of item 9)--- 11. Plus additional cost for military service performed before 1937 and used in computing annuities certified in fiscal year 1965--- 12. Appropriation requested for fiscal year 1967‒‒‒‒‒ $155, 695, 000 -13, 834, 000 141, 861, 000 5, 674, 000 147, 535, 000 16, 393, 000 131, 142, 000 5, 246, 000 136, 388, 000 17, 049, 000 152, 000 17, 201, 000 Completion of nonrecurring work created by 1965 amendments to Social Security and Railroad Retirement Acts $10, 650, 000 $850,000 225, 000 1,075, 000 11, 725, 000 $599,000 Estimated savings from improvements in productivity 162,000 Increases: Projection of new pay rates to annual basis__ Increases in workloads: Wage certifications to Social Security Administration_ Maintenance of beneficiary rolls-- Other workloads_-. Payments to Treasury Department-. Other increases- 761, 000 90,000 64, 000 13,000 8,000 13, 000 14,000 9,000 211, 000 1967 estimate____ 11, 175, 000 (70) |