The Railroad Retirement Board administers a regular railroad retirement system which provides monthly benefits to employees who retire because of age or disability, and to the eligible wives of such employees. The disability annuities are payable both to employees not able to do any regular work and to career railroad employees not able to work at their regular railroad job. In addition, the system provides for monthly and lump-sum benefits to widows, children, and parents. There is also a provision for a residual payment designed to insure that an employee and his family receive at least as much in benefits as the employee contributes in railroad retirement taxes before 1975. Finally, railroad employees with concurrent social security employment can, under certain conditions, receive tax refunds for taxes paid before 1975. For all benefits except the residual payment, a basic requirement is that the employee have at least 10 years of creditable railroad service, including service before 1937. The Board also administers a program for the payment of supplemental annuities under certain conditions to career railroad employees awarded retirement annuities after June 1966. The supplemental annuity paid to employees is in addition to the regular annuity. Under the provisions of the Social Security and Railroad Retirement Acts, the Board participates in the administration of the hospital and medical insurance programs for persons covered by the Railroad Retirement Act. Also, railroad employees and members of their families insured under both systems who apply for social security benefits after December 31, 1974, will have their benefits paid by the Railroad Retirement Board. The Social Security Administration will still determine eligibility to benefits under the Social Security Act. The Board also administers a system for the payment of unemployment and sickness benefits to qualified railroad workers, and an employment service for placing unemployment benefit claimants in jobs. Organizational Structure of the Railroad Retirement Board The Railroad Retirement Board is administered by a three-member Board appointed by the President, by and with the advice and consent of the Senate -- one member upon the recommendation of representatives of employees, one upon recommendation of representatives of employers, and one 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 regular railroad retirement system is financed by taxes paid by railroad workers and employers. The Railroad Retirement Account is credited with the taxes and annuity payments are made from the Account. Funds held in reserve earn interest which is used to help finance future benefit costs of the railroad retirement system. The supplemental annuity program is financed by a tax paid by employers based on the number of man hours for which they pay compensation. This tax is deposited in a separate trust account titled Railroad Retirement Supplemental Account from which the supplemental annuities are paid. The amounts needed for administrative expenses of these programs, as authorized by Congress in annual appropriation Acts, are derived from these trust accounts. The Social Security Administration reimburses the Railroad Retirement Board for the administrative costs incurred for certain Medicare activities. 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 0.50 percent of the taxable payroll on a $400 monthly base 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. Payments to Railroad Retirement Account for Dual Benefits Under the Railroad Retirement Act of 1937, an individual engaging in covered employment under both the Railroad Retirement Act and Social Security Act could, under certain conditions, receive benefits under both Acts. Recipients of such benefits are referred to as dual beneficiaries. Because of a financial interchange arrangement between the Railroad Retirement Board and the Social Security Administration whereby the latter reinsures benefits paid by the Board, the cost of such dual benefits are borne solely by the Railroad Retirement Account. Furthermore, the costs are exacerbated by the fact that 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 proportionately higher return for their taxes since in most instances the social security coverage is only supplementary to their regular railroad employment. Railroad Retirement Act of 1974 provides for general fund appropriations to phase out the cost of this higher return. The The 13th Actuarial Valuation of the Railroad Retirement System, published in conjunction with the 1976 Annual Report of the Railroad Retirement Board, concluded, after undertaking the reestimating procedure called for by Section 15(d) of the 1974 Act, that the level annual amount of appropriation should be $350 million from fiscal year 1977 onwards. Since only $250 million was appropriated in 1977 and 1978, the amount was adjusted to $363 million to take into account the shortfall. The Administration, however, intends to propose legislation designed to no longer index the initial windfall payment and to eliminate the use of a minimum benefit in the windfall amount for workers who retire after June 1979. The effect of this legislation would be to reduce the required level annual appropriation from $363 million to $313 million, the amount appropriated for 1979. The appropriation request for $313,000,000 recognizes this legislative proposal and is being made as a result of P. L. 93-445. It is the fifth of 25 annual appropriation requests designed to phase out the higher return contained in dual benefits. Payments to Railroad Retirement Account for Regional Rail Reorganization Protective Benefits The Regional Rail Reorganization Act of 1973 (P. L. 93-236) provides for various benefits 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 employees will be made by the Consolidated Rail Corporation, the United States Railway Association (where applicable) and acquiring railroads, as the case may be. These organizations upon certification to the Railroad There is no re Retirement Board of the amounts paid to protected employees then will be reimbursed for such amounts by the Board up to a total of $250,000,000 over the years. quest for 1980, as the 1979 appropriation ($25,000,000) and the requested 1979 2 supplemental appropriation ($56,516,000), being transmitted under separate cover, will exhaust the overall authorization of $250 million. The 1979 supplemental request is to cover the expected costs now being incurred in 1979, plus the costs of a new agreement on crew consist signed by Conrail and the United Transportation Union. The effect of this new agreement will be to reduce crew size, and therefore, increase the number of persons eligible to draw protective payments under Title V of the Rail Reorganization Act of 1973. Benefit payments under the Act began in July 1976, and have been extremely difficult to forecast each year. Supplemental appropriations have had to be requested and enacted in 1977 and 1978, and a supplemental appropriation is now requested for 1979. Initially, the Board relied upon the U. S. Railway Association's Final System Plan in forecasting benefits. When it became clear that the final structure of Conrail was not as assumed in the Final System Plan, the Board began relying upon experience-to-date in forecasting. The Board staff has had several recent discussions with Conrail staff in an attempt to obtain the necessary data for accurate forecasting, and has cooperated fully with the House Appropriations Committee investigating staff project on this program. Limitation on Salaries and Expenses The request for the Limitation on Salaries and Expenses is a request for authorization to use railroad retirement trust funds in the amount specified for the administrative expenses of the railroad retirement system. The system is financed by taxes paid by railroad workers and railroad employers into these trust funds, with amounts needed for benefit payments and administrative expenses derived from these funds. The amount requested for 1980 for the Limitation on Salaries and Expenses is $39,730,000, which is $3,027,000 more than the comparable amount of $36,703,000 in 1979. (The 1979 amount is made up of: $34,317,000 in an approved limitation, a requested pay act supplemental of $1,386,000, and a requested program supplemental of $1,000,000 for initiation of a quality control project.) The largest single increase, $3,150,000, is funding for the physical relocation of the Board's headquarters offices, and is summarized separately below. In fiscal year 1980, the Board will undertake the following priority activities: improvement of the timeliness and accuracy of benefit payments; the reduction of special backlogs, especially in the area of post-adjudicative actions; expansion of ADP operations to include programs to automate post-adjudicative work; the development of instructions and procedures to comply with "due process" requirements when establishing and recovering benefit overpayments; and, the expansion of the 1979 quality control project into an ongoing basis in processing benefit payments. During fiscal year 1980, the Board expects to process an estimated 100,000 employee age and disability, spouse and survivor applications, plus 25,000 supplemental annuity and medicare applications, as well as 43,000 social security certifications. Total staff years devoted to all these activities are estimated at 1,539, derived from 1,418 staff years of regular time, 53 of overtime and 68 of temporary employment. Finally, the Board will continue to serve 1,010,000 railroad retirement beneficiaries in 1980 -- about the same level as in 1979. Total benefit payments to these beneficiaries will rise to $4.5 billion in 1980, due essentially to anticipated cost-ofliving increases. Relocation of Board's Headquarters Offices The 1980 Limitation on Salaries and Expenses includes $3,150,000 for the relocation of the Board's headquarters offices. Of this amount $1,400,000 is for increased rental costs in a new location, and $1,750,000 is for the cost of the physical move of the headquarters offices, including ADP equipment, and for purchase of replacement furniture. For several years, the Board has been engaged in discussions with GSA on the question of relocating its headquarters offices from the present obsolete building to more modern and efficient workspace. In 1977 and 1978, the Congress approved funds for a relocation, but space rental limitations in existence at the time on GSA prevented the move, and the funds lapsed without being used. The Board's recent discussions with GSA, including a Board request for a specific amount of space in Chicago, have progressed to the point that the Board expects a move in 1980. The Board is now awaiting GSA's identification of a specific location. |