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Mr. Flood. Now, the Railroad Retirement Board. The presentation will be made by Mr. William P. Adams, the Chairman.

Now you have some people with you.

Mr. ADAMS. Yes. I am William Adams. I would like to introduce for the record the other people at the table here with me.

On my right is the Management Member of the Board, Mr. Earl Oliver. On my left is the Labor Member of the Board, Mr. C. J. Chamberlain. On his left is the Director of Budget and Fiscal Operations, Mr. John Suker. On his left is our Chief Executive Officer, Mr. Kenneth J. Nolan, and on my far right is our General Counsel, Mr. Dale Zimmerman.

I might add that this is the first time since 1976 the Board has had a full complement of three members.

Mr. FLOOD. Since when?

Mr. ADAMS. Since July of 1976. We are all relatively new to the Railroad Retirement Board. Mr. Oliver was confirmed first last August and Mr. Chamberlain was confirmed last October.

Mr. Flood. After we get through with you, you will feel like oldtimers.

Mr. ADAMS. I was afraid you would say that. Mr. Flood. We will insert your prepared statement in the record. [The statement referred to follows:

Railroad Retirement Board
Statement on Appropriation Estimates

Request for Fiscal Year 1979

Mr. Chairman and Members of the Committee, before discussing the specifics of our 1979 budget request, I would like to furnish same general information

regarding the Railroad Retirement Board.

Programs Administered by the Railroad Retirement Board

The Railroad Retirement Board administers a regular retirement system for the payment of retirement and disability annuities to railroad employees, annuities to their spouses, benefits to their survivors, and payment under ærtain conditions of supplemental annuities, in addition to regular annuities. The Board also administers a system for the payment of unemployment and sickness benefits to qualified railroad workers, and participates in the adminis

tration of the medicare program for persons covered by the Railroad Retirement


Structure of the Board

The Railroad Retirement Board is administered by a three-member Board ap

pointed by the President, by and with the advice and consent of the Senate

ane member upon the recommendation of representatives of employees, one upon recommendation of representatives of carriers, and one, the Chairman, without designated recommendation. The present carrier member was first appointed August 5, 1977, the labor member on October 10, 1977, and the at large member

was appointed on February 14, 1978.

Financing the Railroad Retirement Program

The railroad retirement system is financed by taxes paid by railroad en

ployees and employers into trust funds. The amounts needed for benefit

payments and administrative expenses are derived from these trust funds. Congress must authorize the amounts to be spent for administrative expenses.

Payments for Dual Benefits

Under the Railroad Retirement Act of 1937, an individual engaging in cov

ered employment under both the Railroad Retirement Act and Social Security Act

could, under certain conditions, receive benefits under both Acts.


the weighting factors inherent in the social security benefit formula produce

a proportionately higher benefit for low earnings and short term employees,

dual beneficiaries receive a higher return for the taxes contributed since in

most instances the social security coverage is only supplementary to their

regular railroad employment. The cost of this higher return was borne by the

Railroad Retirement Account.

The Railroad Retirement Act of 1974, P. L. 93-445, authorizes annual

general fund appropriations on a level cost basis from 1976 through year 2000 to phase out the cost of this higher return. P. L. 93-445 also provides that

the Board shall, at the time of each actuarial valuation prior to the fiscal

year 2000, determine whether an adjustment should be made in this appropria


The thirteenth actuarial valuation indicated that the level appropria

tion starting with fiscal 1977 should have been $350 million.

Since only $250

million had been appropriated for 1977 and 1978, the $350 million was in

creased to $363 million starting with fiscal 1979 to make up for the $200 mil

lion shortage in 1977 and 1978 and the loss of interest on that $200 million.

The Administration 18 proposing legislation to no longer index the initial

windfall benefit for workers who retire after December 31, 1978. This is de

signed to decrease the amount from $363 million to $313 million.



Payments for Regional Rail Reorganization Protective Benefits

The Regional Rail Reorganization Act of 1973 provides for various bene

fits to protected employees adversely affected in the establishment of the

Midwest and Northeast rail system provided by that Act.

The payment of all allowances, expenses, and costs provided protected em

ployees will be made by specified organizations under that Act.

Upon certifi

cation to the Railroad Retirement Board these organizations will be reimbursed

for amounts paid to protected employees.

A general fund appropriation request

of $25,000,000 for 1979 is being made to cover estimated benefit payments in


The amount includes $75,000 for administrative expenses incurred by the

Board to carry out its responsibilities under the law.

Limitation on Salaries and Expenses - 1979

The amounts requested under this appropriation account title represent a

limitation on the use of trust fund monies for the administrative expenses of

the railroad retirement system. Repeated amendments to the basic Acts present

a continuing problem in attempting to keep abreast of workloads.

These amend

ments were culminated by the passage of Public Law 93-445, the Railroad Re

tirement Act of 1974, effective January 1, 1975, which completely restructured

the railroad retirement system.

For fiscal year 1978, the regular limitation on salaries and expenses 18

$33,282,000, which is the amount approved by the House and Senate.

There is

now pending a Pay Act supplemental of $1,590,000 for 1978, which would raise

the 1978 limitation to $34,872,000. The 1978 regular limitation included

$1,100,000 in increased rental costs in the event the Board's headquarters was

moved to new quarters.

That move did not take place thus far in 1978, but we

are now negotiating with GSA to resolve our space problem.

With the remaining funds, we expect to continue to service the monthly

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benefit roll of 1,030,000 beneficiaries; process 225,000 new applications for

benefits and pay benefits amounting to 4 billion dollars.

For fiscal year 1979, the budget request contains $34, 317,000 as the

Limitation on Salaries and Expenses.

In fiscal year 1979, we will attempt to

clear up the backlogs created by Social Security Amendments of 1977 and

Supreme Court decisions that carried over from 1978, service the monthly ben

efit roll of 1,030,000 beneficiaries, process 171,000 new applications for

benefits and pay benefits amounting to 4.2 billion dollars.

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