be computed as any other social security benefit. The second tier would be on some new formula. However, people currently on the benefit rolls would be guaranteed under the two-tier system that they would get no less than they are getting currently. So that all beneficiaries now being paid would have to have their benefits recomputed to the new two-tier system. IMPROVEMENTS IN CLAIMS HANDLING Mr. FLOOD. What have you done in the last year to improve the method of handling claims? Mr. RUDISIN. We continue to introduce conversions of manual operations to computer programs; that is, different bits and pieces of the operation that were formerly handled manually are now programed for handling by the computer. As far as streamlining operations is concerned, there is always continuing attention made to keep costs at a minimum with due regard to proper and adequate services. Mr. FLOOD. I wish you would develop for the record the answer to that question specifically. You told us last year what you were going to do. What did you do yourself to look better this year in view of what everybody knew was going to happen? [The information follows:] REDUCTION IN PARTIAL AWARDS Improved coordination with SSA and revisions in the EDP program permitted an increase of 50 percent in cases that could be paid at the full and final rate at the time of initial award for beneficiaries who are insured under social security. ACCRUED INCREASES IN CURRENT CHECKS Public Law 92-460 provided a retroactive increase in benefit rates for some 740,000 beneficaries. The retroactive amount was included in the regular monthly check rather than being paid in a separate check as was done in the past. This reduced postage and check preparation costs. BENEFICIARY INFORMATION CARD The Board has produced a microfilm record for each district office covering beneficiaries residing in the area serviced by the district office. These records include enough information about the annuity for the district office to answer most inquiries about entitlement and benefit rates without referral to central office records, thus improving service to beneficiaries and reducing costs. MICROFILM The Board expanded its use of microfilm in headquarters in order to eliminate various voluminous listings. These listings, which often included data for 1 million beneficiaries, were prepared for cases which had been adjusted in amendment operations, supplemental medical insurance benefit premium increases, and other mass adjustments. These listings were used by claims examiners for answering correspondence, recertification of benefits, et cetera. The use of microfilm has made it much easier to refer to data necessary for those purposes. REDUCTION IN NUMBER OF MANUAL AWARDS REQUIRED AFTER AMENDMENTS New techniques in EDP processing reduced by 50 percent the number of amendment adjustment cases that would otherwise have to be processed manually. Since manual awards take much longer than mechanical awards prepared by the computer system, benefits were increased much faster and much more accurately than heretofore. TECHNICAL AMENDMENTS The Board suggested legislation that limited the amount of work that otherwise would have resulted from H.R. 1. These amendments were included in the 1972 RRA amendments which increased benefits by 20 percent. The technical amendments had the support of labor, management and the Office of Management and Budget. POLICING Improvements in policing programs utilizing tape records have reduced paperwork and identified overpayment cases on a more timely basis. This has resulted in a greater recovery of overpayments because overpayments which accumulate because of administrative delays are often waived and has reduced large overpayments by more quickly identifying cases of this type. COMPUTER RENTAL Mr. FLOOD. You are talking about renting a computer. What convinces you that renting is going to be cheaper than buying? Mr. RUDISIN. There are some uncertainties as to where the system is going and what the ultimate demands will be on a computer. If we have this two-tier system that the Commission on Railroad Retirement has recommended, we still have no idea as to how involved some of the benefit formulas might be with respect to the second tier. The first tier would be based on the social security formulas. Mr. CowEN. The railroad retirement program is one of the most complicated, if not the most complicated, in existence. The two-tier system must, of necessity, simplify the computation of benefits, and the manner of handling them. Since the extent of this simplification is uncertain, it may not require the purchase of the third computer. Mr. QUARLES. I would like to add, too, Mr. Flood, if I may, that in all of the contracts we have negotiated we do have a proviso in there that a certain percentage of the rental figure would apply in the event we sought to buy. Mr. FLOOD. That is a good point. OPTICAL SCANNING EQUIPMENT I am going to quote from your justifications, and I want you to explain this. "Rental of optical scanning equipment for a test pilot installation." Is that a forerunner of a much larger request in next year's budget? Mr. CowEN. The scanning equipment really would reduce the need for key punching and would reduce the man-years needed for key punching and would offset it. There are problems now with respect to the machinery and equipment which is now on the market, the design of forms. Mr. CONTE. Mr. Chairman. Mr. FLOOD. Yes. Mr. CONTE. Can't you get that information from IRS or the Bureau of Accounts? Mr. CowEN. We have had a group of our own people go around and evaluate equipment around the country and they have checked into several kinds. We were going to bring it in on a test basis during fiscal year 1974. Mr. CONTE. You did not answer my question. Mr. CowEN. About the use of the scanning equipment? Mr. CONTE. These are about the oldest agencies in the Federal Government using this equipment. Mr. RUDISIN. Our people have checked with the VA. The VA has very extensive applications with respect to optical scanning. Our operations in some instances are not too similar, but VA apparently is sold on optical scanning and we would like to bring in this moderatesize scanner on an experimental basis, that is, a rental basis, to have some of the work programed to see how well some of the simpler operations go. If they are successful, we would visualize more extended applications. Mr. CONTE. Have you looked into the optical scanning equipment in the Post Office? Mr. RUDISIN. I do not know if they have contacted the Post Office. I know definitely they have dealt with the VA and have secured their basic procedures and samples of the different forms that have been devised for processing by the optical scanning equipment that VA has. Mr. CONTE. Thank you, Mr. Chairman. COMPLEXITY OF SYSTEM Mr. FLOOD. In your opinion is the railroad retirement system now in danger of becoming too complicated to be properly administered? Mr. CowEN. The current railroad retirement program is extremely complicated. Mr. FLOOD. I know that. Mr. CowEN. Too complicated to be administered? No, Mr. Flood, we are administering it. It does take more money than it used to because of the complications that have been introduced since 1966. Mr. FLOOD. Mr. Shriver. MILITARY SERVICE CREDITS Mr. SHRIVER. I have just one question, Mr. Chairman. The $22,478,000 requested for payments to the railroad retirement account for military service credits is the last of 10 yearly installments; is that correct? Mr. COWEN. That is correct. Mr. SHRIVER. Does this mean this is the last time we will hear about that? This is the last request for appropriations. Mr. Cowen. Of this magnitude, yes. Next year I believe there will be an adjustment for interest payments because insufficient interest was used in computing this interest schedule. Am I correct on that? Mr. RUDISIN. There would be some adjustment for delays in making these appropriations available based on the fact that we computed interest only up to July 1 of a fiscal year. Mr. SHRIVER. Would you further explain the authorization for that? Mr. CowEN. Prior to June 30, 1963, the railroad retirement account was reimbursed from the general funds of the Treasury on a tax basis as if railroad service were taxable railroad income and the Govern ment was paying both the employee and employer's share of the taxes. The 1963 amendments to the Railroad Retirement Act put military service on an actual cost basis from that point on. At the time of enactment of the 1963 amendment there was $155,695,000, due to the railroad retirement account for taxes on that military service performed before June 30, 1963. As part of the agreement which was made at that time to settle it, it was agreed that the taxes instead of being paid all at once would be spread over a 10-year period, and the method of computation of those 10 installments would be as listed in our justification statement. Mr. RUDISIN. With interest included on the later installments. Mr. SHRIVER. Thank you, Mr. Chairman. PENN CENTRAL FAILURE Mr. NATCHER. Mr. Cowen, as my chairman has pointed out, the railroad retirement system has become right complicated. What would happen if the Pennsylvania Railroad has to be taken over by the Federal Government? Mr. COWEN. I would assume that the employees of the Pennsylvania Railroad would then be treated as the employees of Amtrak are and would be covered under the Railroad Retirement Act and that the Government and the employees would continue to pay the railroad retirement tax. Mr. NATCHER. Under the present law concerning the railroad retirement system, is there provision for such a move? Mr. COWEN. The law provides that any rail carrier which is subject to the Interstate Commerce Act is covered under the Railroad Retirement Act for benefit purposes. As I said, Amtrak has been determined to be an employer under the Railroad Retirement Act, and that is a Government-sponsored corporation. COMMISSION ON RAILROAD RETIREMENT Mr. NATCHER. Mr. Cowen, you point out to the committee that the Commission on railroad retirement has submitted certain recommendations to Congress. Such as what? Mr. COWEN. The main one, as I said, was the restructuring into a two-tier system. The report was House Document 92-350. That is the report of the Commission on railroad retirement. They have four major recommendations. With your permission I would read them. 1. The railroad retirement system should be restructured into two separate tiers of benefit. Tier 1 should provide regular social security benefits, financed and paid under the social security laws and represented by a separate social security check. In relation to Tier 1, the Railroad Retirement Board should function as a social security claims agent and payment center for claims taking, adjudication and certification for payment of social security benefits for railroad beneficiaries in accordance with policy set by the Social Security Administration. Tier 2 should be a completely separate supplementary retirement plan administered by the Railroad Retirement Board under Federal law structured to fit with and augment social security and float on top of Tier 1. 2. Legally vested rights of railroad workers and railroad retirement beneficiaries to benefits based on social security covered nonrailroad service should be guaranteed but future accrual of these dual benefits should be stopped. 3. A firm financial plan should be adopted forthwith to finance the second tier of supplementary benefits through the Railroad Retirement Act on an assured, fully self-supporting basis by contributions from the railroad community through the crisis period of the next 20 to 30 years and then beyond. 4. The benefit formulas and provisions of the system should be restructured and revised to assure that the overall benefits in the future continue to bear a reasonable relationship to wages in a dynamic economy and to make benefits more equitable among the various groups of beneficiaries. Those are the four main recommendations of the Commission. Mr. FLOOD. Mr. Conte? MANUAL CASE PROCESSING Mr. CONTE. Mr. Cowen, in the justification, the Board indicates a large number of cases are being handled manually because of changes in the social security laws. Do you anticipate that this is going to increase? Mr. COWEN. The large number of cases, I believe, is the transition due to the recent amendments. I do not believe it will increase. As a matter of fact, I believe it will decrease. Mr. CONTE. It is quite costly to handle them manually? COMPUTER TAPES FROM SOCIAL SECURITY Mr. CONTE. Part of the problem, as you have pointed out, is that the computer tapes have to be obtained from Social Security and integrated into the Board's records. What efforts have been made to speed up this process in the plan for more rapid transition in the future? Mr. CowEN. This is a one-time effect, just for the implementation of the new minimum formulas which are in the social security law, due to Public Law 92-603. As far as regular, ongoing procedures go, those work very speedily now, and have always worked speedily. This is really for the backlog of cases. Mr. CONTE. You have looked to the future, though? Mr. CowEN. Yes. RENT, COMMUNICATIONS, AND UTILITIES Mr. CONTE. You state an increase of $104,000 is needed for rent, communications, and utilities. For the record, supply the details of those increases. [The information requested follows:] The increase of $104,000 for rents, communications, and utilities consists of the following: 1. Annualization of rental of computer acquired in mid-August 1972 to replace a 12-year-old computer owned by the Board.. 2. Rental of optical scanning equipment for a test pilot installation__ 3. Increase in maintenance costs of headquarters building and in cost of telephone service__. Total +$45, 000 +30,000 +29, 000 +104, 000 |