SALARIES AND EXPENSES, RAILROAD RETIREMENT BOARD (TRUST FUND)

Itemization of estimates

General

DETAILED JUSTIFICATION OF ESTIMATES

The detailed justifications of the budget estimates for administrative expenses of the Board for fiscal year 1967 follow in several sections.

The estimates of administrative expenses are justified initially by activities of the Board. The justification by activities deals primarily wth man-year requirements and their relationship to workloads. No reference is made to personal service unit costs since such costs change in the same proportion as changes in man-year productivity, except as modified by pay increases, by within-grade salary advancements, and by changes in the proportions of various grades of employees as staffs are adjusted for changes in workloads and programs.

The justification by activities is followed by a justification of costs by object of expense. Miscellaneous expenses are justified by object of expense since comparisons of such costs by activity on a unit cost basis are not completely valid because such costs do not necessarily fluctuate in the direct proportion to changes in workloads.

DETAILED JUSTIFICATION OF OBLIGATIONS BY ACTIVITY

1. Maintenance of earnings accounts

The maintenance of earnings accounts includes the work of processing of employers' reports of employees' compensation and service, for use in making claims payment determinations. Information must be accumulated for every railroad employee to identify the actual calendar months worked and the creditable earnings from January 1937 to date. In addition, railroad service rendered prior to 1937 also must be developed when claimed, since such service usually is creditable under the act.

The workload for maintaining wage accounts of railroad employees fluctuates with the level of employment in the railroad industry, rates of turnover, and similar factors. The best single workload item to use to measure the level of activity in this work is the number of accounts in which earnings have been recorded. This basic work unit is used in the following table to show relative productivity in the years under comparison:

A gain in productivity of 7.2 percent is expected from 1965 to 1967.

2. Processing claims

980,000 37.6

26, 064

The requirements for this activity have been subdivided into the four categories of (a) development of claims, (b) certification of compensation, (c) claims inquiries, and (d) special amendment work, with each of the categories being handled separately in the explanations that follow.

Development of claims

The budget estimates are based on the expectation that claims receipts and dispositions in 1966 and 1967 will remain at the level experienced in 1965. However, these estimates may prove to be somewhat low because there may be some acceleration in retirements as a result of the 1965 amendments to the Social Security Act. The increased benefit rates, liberalized earnings restrictions, and the added protection of the hospital and medical insurance programs may make retirement more enhancing especially to individuals eligible for benefits under both the Railroad Retirement Act and the Social Security Act.

The scheduled productivity and the man-year requirements for the development of claims in the years under comparison are as follows:

The Board's program to improve the utilization of manpower and reduce costs is expected to produce an increase in the number of claims dispositions per man-year from 1965 to 1966 and 1967 even in the face of two factors having a depressant effect on productivity.

First, the 1965 amendments to the Social Security Act have introduced new complexities in the development of claims under the Railroad Retirement Act. For example, benefits may be paid under the amended Social Security Act to a full-time study age 18 to 22, but even though such a student does not qualify for benefits under the Railroad Retirement Act he may be included in computing benefits for a family group under the minimum guarantee provision of the Railroad Retirement Act. Various other provisions of the 1965 Social Security Amendments relating to divorced women and remarried widows who are not currently married; payment of widow's and widower's benefits after remarriage; the change in the definition of a child; and other provisions add complexities in varying degree to the processing of claims under the Railroad Retirement Act.

Second, in planning for a downward adjustment in the staff of claims examiners through attrition, the recruitment of replacement claims examiners, of course, was suspended. Thus, this activity was spared the considerable expense in 1965 of carrying claims examiner trainees who can contribute little to productive work during extended training in the highly technical work of claims development. Now, the shrinkage in the staff of claims examiners has been so great through deaths, retirements, transfers, reassignments, and resignations, that it has been necessary to resume recruitment of trainee claims examiners. These added training costs are another element to consider in comparing productivity scheduled for 1966 with that attained in 1965.

Even with these two added cost elements of consequence for consideration in 1966 and 1967, the Board expects to increase productivity from 251.9 claims dispositions per man-year in 1965 to 254.7 claims dispositions in 1966 and 258.4 claims dispositions in 1967.

Certification of compensation

This activity includes certification of compensation for use in making claims payment determinations in all cases payable under the Railroad Retirement Act and for cases payable under the Social Security Act where railroad service is involved.

Workloads for certifying records of compensation are as follows:

The workloads estimated for 1966 and 1967 for Railroad Retirement Board claims are in line with recent experience. The increase in workloads for Social Security Administration claims are based on information furnished us by the Social Security Administration. The requests for certifications are estimated to increase from 194,966 in 1965 to 220,000 in 1966 and 225,000 in 1967 as a result of the 1965 amendments to the Social Security Act.

The man-year and productivity data for this certification work are as follows:

A gain in productivity of 3.9 percent is expected from 1965 to 1967.

Claims inquiries

5,996. 3

The man-years allocable to claims inquiries include time spent in field offices answering general inquiries from beneficiaries as well as inquiries handled at headquarters. Man-year requirements for 1966 and 1967 are estimated to continue at the 1965 level of 80.7 man-years.

Amendment work

The 1965 amendments to the Social Security Act made major changes in the old-age and survivors and disability insurance programs, which required the Railroad Retirement Board to make adjustment in its benefit rates in order to restore the relationship in benefits under these systems as required by law. Railroad retirement benefits are always at least 10 percent higher than the amount the social security system would pay. Because of this special guarantee, most survivors and some retired employees became entitled to increases in their annuities because of the increases in social security rates. Also, a large number of wives of retired railroad employees became entitled to increases because the maximum amount that can be paid to the wife was raised; and various additional adjustments became necessary under other provisions of law. The 1965 amendments to the Railroad Retirement Act eliminated the requirement that reductions be made from spouse annuities by the amounts of other annuities for which the spouse would be eligible as a wage earner, which required the Board to make additional adjustments in benefit rates and to process applications from spouses not on the rolls who became newly eligible for benefits.

The amendments also require the Board's participation in the administration of the new programs of hospital and medical insurance benefits. The Board will participate in the administration of the hospital insurance program under the provision of the 1965 Amendments to the Social Security Act which requires that the Board certify to the Secretary of Health, Education, and Welfare the names of individuals who have attained age 65 and who are entitled to an annuity under the Railroad Retirement Act or would be entitled to such annuities had the individuals ceased compensated service. The Board will participate in the administration of the medical insurance program under the provision of the 1965 amendments which requires that with respect to individuals electing to participate in the program and who are entitled to receive annuities under the Railroad Retirement Act, the required monthly premiums shall be collected by deducting the amounts thereof from railroad retirement annuities. To make such deductions, the Board will ascertain from its annuitants whether they wish to enroll for the medical insurance program and accept their commitment.

The man-year requirements for handling work created for the Board by the 1965 amendments are as follows:

Effecting benefit rate changes and processing applications from individuals who became newly eligible for benefits as a result of amendments. Participation in administration of hospital and medical insurance programs..

Total...

1 Includes 88 man-years to be financed by a supplemental appropriation.

Provision is made in 1966 for 58.7 man-years to process 385,000 adjustments in benefit rates made necessary because of the 1965 Amendments to the Social Security Act and to process 17,000 applications from spouses who became newly eligible for benefits as a result of the 1965 Amendments to the Railroad Retirement Act. Of the 385,000 benefit adjustment cases, an unusually large number could not be processed by the computer and required manual examination and development work.

Provision is made in 1967 for 2.7 man-years for some further adjustments in spouse rates which become effective in January 1967.

The manpower required for the Board's participation in the administration of the hospital and medical insurance programs is estimated at 43.5 man-years in 1966 and 30.5 man-years in 1967.

Activities in 1966 include contacting by mail 510,000 eligible individuals on the beneficiary rolls to determine if they wish to elect coverage under the supplementary medical plan; processing applications for eligibility to hospital and medical benefits from 40,000 individuals age 65 and over who had not ceased compensated service; preparation of a roster of enrolled individuals; handling inquiries; etc.

Activities in 1967 include development actions for 40,000 individuals becoming newly eligible for hospital and medical benefits; maintenance of the roster of 550,000 enrolled individuals; collection of premiums from those individuals on beneficiary rolls who enrolled for the supplemental medical insurance; handling inquiries regarding the health and medical insurance programs; administering the hospital insurance program for eligible Canadians; etc.

3. Maintenance of beneficiary rolls

This activity covers the maintenance of the monthly rolls of retirement and survivor beneficiaries.

The volume of monthly benefit payments tends to grow steadily larger as the system ages. This growth will continue until the retirement system reaches maturity, a number of years hence.

The costs of this activity have been subdivided into the two categories of (a) accounting activities, and (b) investigations of continuing eligibility, with each of the categories being handled separately in the explanations that follow.

Accounting activities

Once the individual applicant has been certified as entitled to monthly payments, subsequent monthly recertification is required to continue such payments. This activity covers operations involved in preparing, verifying, balancing and scheduling for payment of the monthly roll of annuity payments, making changes in the roll required by new awards, terminations by death or changes in benefit status, changes of address, and other servicing of the payment roll. The workloads, man-years and productivity for this activity are as follows:

The Board expects to be able to limit man-year usage in 1966 and 1967 to the 1965 level even though workloads will rise by approximately 4 percent from 1965 to 1967.

Investigation of continuing eligibility

Until fiscal year 1962, the principal method used by the Board to check on the eligibility of beneficiaries to continue to receive monthly benefits was through the use of annual questionnaires. With the installation of the computer, plans were made to develop a more comprehensive program of checking Social Security Administration records for disqualifying data by means of magnetic tape. In fiscal year 1963, the Board and the Social Security Administration had in operation an electronic program for exchanging information for use in coordinating the activities of both agencies and for policing beneficiaries on their respective rolls. Under this program, each agency earmarks its master tape record to indicate the data required by the other. Periodically, each agency notifies the other of