"OTHER SERVICES"

Mr. CONTE. You indicate there is a requested reduction of $140,000 for "other services." For the record, could you break that down?

[Information requested follows:]

Public Law 92-603 extended medicare coverage to disabled persons under age 65 when they become entitled to disability annuity benefits for not less than 24 months. Coverage for eligible persons becomes effective July 1, 1973. For railroad retirement disability beneficiaries to acquire this new medicare coverage, they must meet Social Security Administration standards for disability. Because there are some differences in disability standards for the railroad retirement and social security systems, it will be necessary for the Board to reexamine initially, and on a continuing basis, many of the cases of persons receiving disability benefits to determine whether they meet Social Security Administration criteria. This will entail the scheduling of medical examinations by private physicians. The cost of medical examinations in 1973 will be especially high because of the large initial load of cases to reexamine. The decrease of $140,000 in "other services" is attributable solely to the decrease in the level of medical examination costs in 1974 to a nominal level.

Mr. CONTE. I would also like to know where the reductions will take effect, and when.

[Information requested follows:]

For the reasons indicated in the response to the preceding question, the reductions will occur in the cost of medical examinations conducted to establish disability and will be reflected in fiscal year 1974, with the 1974 level expected to continue into ensuing fiscal years.

NONRECURRING WORK

Mr. CONTE. On page 15, you state that mostly nonrecurring work created by recent legislation will be completed by the beginning of fiscal year 1974. What percentage of the nonrecurring work will be completed by that time? Supply that for the record.

[Information requested follows:]

Approximately 85 percent of the nonrecurring work created by recent legislation will be completed by the beginning of fiscal year 1974.

LEGAL AND FISCAL ACTIVITIES

Mr. CONTE. On page 15, you propose a moderate allowance to strengthen the legal and fiscal activities. Will you please specify how this is to be done, and how many extra personnel will be used in this area?

Mr. Cowen. With respect to the legal, I can answer something right now. We have had a great attrition on our lawyers over the years. We are very short right now.

Mr. CONTE. How short are you? Why do you have a great attrition? Mr. CowEN. Age and the inability we have had to really recruit in the past. However, I was told last Friday by our general counsel that he has made commitments to hire four people, one of whom went on duty today. One more will come on in fiscal year 1973, and two will come on early in July.

Mr. CONTE. At what do you start these lawyers-what kind of salary?

Mr. CowEN. Grade 11. I don't really know what the salary of a Grade 11 is. I believe it is in the order of $12,000, but I am not sure. I can check that for the record.

Mr. CONTE. Put something in the record on the fiscal and auditing activity.

[The information follows:]

Several key employees in fiscal and auditing activities are expected to retire in the near future. There are insufficient numbers of professionally qualified employees in lower grades to step into these key posts. Action must be taken now to recruit and develop appropriately qualified trainees.

RECRUITMENT OF ACTUARIES

Mr. CONTE. Do you have difficulty in getting actuaries? I notice you are an actuary.

Mr. CowEN. I am an actuary. Yes, we have had a lot of difficulty in that over the years. I was the Board's chief actuary before I came into this job in October 1972. My predecessor came back on a temporary basis while we are trying to recruit a new chief actuary. We are having some difficulty.

Mr. QUARLES. We sent out over 500 letters to the society and have had only two replies expressing interest.

Mr. COWEN. Six negative replies.

Mr. CONTE. All these kids looking for jobs-especially summer interns studying political science and history majors. I tell them this is a field where you just can't find an actuary in this country.

Mr. CowEN. Right now we are looking for a chief actuary, but the social security chief actuary has announced he will be leaving in April, and they are looking.

Mr. CONTE. Speaking of actuaries, how actuarially sound is your fund?

Mr. CowEN. It is not. That is one of the troubles. That is one of the reasons why the Commission on Railroad Retirement was created by Public Law 91-377.

Mr. CONTE. You say "it is not." Could you tell us how bad it is? Mr. CowEN. According to the projections made by the Board's actuaries which agree exactly with the projections made by the Commission on Railroad Retirement, we are in danger of running out of funds in the year 1986, if the 10, 15 and 20 percent increase which we have had on a temporary basis are made permanent.

Mr. QUARLES. And no other financing.

Mr. CONTE. Thank you, Mr. Chairman.

Mr. FLOOD Mr. Obey.

Mr. OBEY. No questions.

Mr. FLOOD. Mrs. Green?

Mrs. GREEN. The last question was my only one. I have been getting letters on this, that the trust funds are going to run out.

Mr. CowEN. This is true.

Mr. FLOOD. Thank you very much.

Mr. CowEN. Thank you.

1/ The appropriations for 1973 had not been enacted at the time these justifications were prepared.

SUMMARY AND HIGHLIGHTS

Programs Administered by the Railroad Retirement Board

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. Finally, there is 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. 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.

Also, under the provisions of the Social Security and Railroad Retirement Acts and under a delegation of authority from the Social Security Administration, the Board participates in the administration of the hospital and medical insurance programs for persons covered by the Railroad Retirement Act. This combination of statutory and delegated authority places the Board in much the same position in dealing with persons covered by the Railroad Retirement Act with respect to the medicare program as that of the Social Security Administration in dealing with its beneficiaries. Of course, the delegated functions are performed on a reimbursable basis.

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 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.

95-751 73 - pt. 6 - 2

Means of Financing

The regular railroad retirement system is financed by taxes paid equally by railroad workers and employers. The Railroad retirement account is credited with the taxes and annuity payments are made from the Account.

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 funds.

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 per cent 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.

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 $22,478,000 is requested to pay the last of ten yearly installments on the amount due the Railroad retirement account for creditable military service for the period through June 30, 1963.

Limitation on Salaries and Expenses

The original 1973 budget estimate for the Limitation Salaries and Expenses was $19,822,000. The amount had not been enacted at the time these budget justifications were prepared. A request has been submitted to amend that budget estimate to increase it by $1,558,000 for a total revised request of $21,380,000 for fiscal year 1973. The increase is required because laws enacted subsequent to the transmission to Congress of the budget estimate require expenditures beyond administrative control. The laws involved are Public Law 92-336, approved July 1, 1972, Public Law 92-460, approved October 4, 1972, and Public Law 92-603 (H.R. 1), approved October 30, 1972.

Public Law 92-336 amended the Social Security Act to provide a 20% increase in benefits effective September 1, 1972, to persons covered by that Act. Under a coordinating provision in the Railroad Retirement Act, some 250,000 of the 990,000 beneficiaries on the rolls of the Railroad Retirement Board also became entitled to this increase. The coordinating provision guarantees that railroad retirement benefits cannot be less than 110% of the benefits that would have been payable under the Social Security Act based on combined railroad and social security service, less benefits payable directly by the social security system.

Public Law 92-460, enacted in October 1972, amended the Railroad Retirement Act to provide a temporary 20% increase in benefits retroactive to September 1, 1972, for the 740,000 railroad retirement beneficiaries who did not receive increases under the provisions of Public Law 92-336. This temporary 20% increase as well as the temporary 10% and 15% increases provided by Public Law 92-46 and Public Law 91377 are scheduled to expire June 30, 1973. When it enacted Public Law 92-460 on October 4, 1972, to provide the temporary 20% increase, Congress directed representatives of employees and retirees and representatives of carriers to recommend a plan by which all three temporary increases could be financed soundly on a permanent basis. This plan is to be submitted by March 1, 1973, to the Senate Committee on Labor and Public Welfare and the House Committee on Interstate and Foreign Commerce. The Railroad Retirement Board and the Administration then are to submit to those Committees their comments on the plan by April 1, 1973.

Public Law 92-603 amended the Social Security Act to provide, among other things, medicare coverage to disabled persons, to increase widows' benefits up to 100% of the employee's primary insurance amount compared to the previous 82%, and to liberalize various other benefits. This law affects railroad retirement beneficiaries in much the same way as it affects social security beneficiaries. However, basic differences in the railroad retirement and social security systems create added problems for the Board in some areas in implementing this legislation.

The added work created by the three new laws includes giving effect to the 250,000 benefit increases provided by P.L. 92-336, the 740,000 increases provided by P.L. 92-460, and the 185,000 additional increases for widows provided by P.L. 92-603; establishing eligibility for medicare coverage for disabled persons under age 65 as provided by P.L. 92-603; and giving effect to various other changes in benefit provisions provided by P.L. 92-603. Although most of the increases in benefit rates will be handled mechanically by a computer, approximately 40,000 cases will have to be processed manually because of insufficient or inconsistent data in tape records and because of the occurrence of intervening events affecting entitlement where increases are retroactive. The extension of medicare coverage to disabled persons under age 65 potentially affects some 51,000 beneficiaries under age 65 who are currently receiving railroad retirement benefits based on disability, and 45,000 beneficiaries under age 65 currently receiving benefits not based on disability but who in fact now may be disabled. The first group will require the manual reexamination of some 18,000 cases. From the second group, we expect approximately 6,000 applications to establish disability in order to qualify for medicare coverage.

The original request of $19,822,000 for 1973 would have provided a total of 1,263 man years, including man years for overtime, for regular work of the Railroad Retirement Board. The revised request of $21,380,000 provides a total of 1,365 man years to also cover added work stemming from new legislation.

The 1,365 man years would enable us to handle during 1973 most of the added work created by new legislation; process approximately 155,000 new applications for benefits in 1973 and keep the load of 15,000 claims pending at the start of 1973 (excluding cases in which a partial award was made) from increasing; and perform essential work relating to the maintenance of the beneficiary roll of 990,000 persons.

The amount requested for 1974 is $21,330,000, which includes $500,000 that would be apportioned for use only to the extent necessary to process workloads not anticipated in the budget. It is especially important that such a contingency amount be provided for 1974, because the Commission on Railroad Retirement has submitted recommendations to Congress calling for extensive changes in the structure of the railroad retirement system. Enactment of the recommendations would call for administrative activity on a larger scale than has ever confronted the Board, to bring about the transition to a new system in an orderly manner. legislation is enacted late in fiscal year 1974 to adopt the recommendations, there would be insufficient time to secure enactment of a supplemental appropriation before the close of the fiscal year. With the contingency amount, implementation of such legislation could begin without delay.

If

The amount requested for 1974, excluding the contingency amount of $500,000, provides for 1,303 man years, including overtime. The 1,303 man years would enable us to clear up some non-recurring workloads created by the three laws enacted in fiscal year 1973 that carry over into 1974; deal with added work of a continuing nature created by new legislation; process approximately 152,000 new applications for benefits in 1974 to reduce the pending claims load to 14,000 by the end of 1974; and perform essential work relating to the maintenance of the beneficiary roll.

The changes from the revised request for 1973 of $21,380,000 to the request for 1974 of $21,330,000 consist of a decrease of $774,000 for completion of most of the non-recurring work created by new legislation; partially offset by an increase of $120,000 for within-grade salary advancements, an increase of $45,000 to annualize the rental of a computer acquired in mid-August 1972 to replace a twelve-year old computer owned by the Board, miscellaneous other increases of $59,000, and an increase of $500,000 to provide a contingency amount to be used only for workloads not anticipated in the budget estimates.