Section-by-Section Analysis of the draft bill marked A, which would amend existing law only. Section-by-Section Analysis of the Bill Introduction The special formula for computing an annuity under the Railroad the combined amounts for which an individual, and those deriving from Section 1(a) The new clause (vi) of section 3(e). For the purpose of determining the amount of a special annuity, the Board is now required to take into account all individuals who would be entitled to benefits under the Social Security Act had railroad service been creditable under that Act. Many of these individuals (such as divorced wives, or divorced or remarried widows are not entitled to annuities under the Railroad Retirement Act. Consequently, the Board has no information about them, or of their whereabouts, and the effort to secure such information entails many administrative problems. To afford relief in this respect, the new clause (vi) of section 3(e) provides that, for the purpose of determining eligibility for, and the amount of, the special annuity, the Board need take into account only those individuals in the annuitants' families who could qualify for annuities under the Railroad Retirement Act, or who are the annuitants' wives or children. -2 The new clause (vii) of section 3(e). In cases being paid as regular annuities, problems arise when social security benefits are increased. In such cases, the Board is required to ascertain whether the social security increase would result in a transfer of the annuity' from the regular formula to the special one. To do this, the Board must determine if the annuitant has qualified dependents (such as minor, disabled or student children) who are not entitled to benefits under the Railroad Retirement Act while the annuitant is alive but who could be included in the computation of the special annuity. This requires the Board to send out questionnaires to get information about the annuitant's family composition at the time of each amendment to the Social Security Act. It is estimated that of about 300,000 such questionnaires which would have to be sent out to regular annuitants, only a small number (less than 2,000) would have such dependents. To relieve the Board of the necessity of sending out questionnaires, the new clause (vii) of section 3(e) authorizes the Board to include only members of the family on the Board's benefit rolls, or those included in the special annuity at the time of such social security increase, for the purpose of determining eligibility for, and the amount of, a special annuity because of the . increase. This provision would be used only in cases where the special annuity could have applied but it had previously been determined that the regular annuity produced a higher benefit. This would not preclude the transfer of a regular annuity to a special one in cases where, for example, the annuitant marries and the sum of his and his wife's annuities is less than required by the special formula; or where the annuitant, who -3 is awarded a reduced regular annuity, attains age 62; or where a disability annuity is awarded under the regular formula solely because the six-month waiting period required by the Social Security Act for eligibility for disability benefits under that Act had not yet expired at the time the annuity was awarded. In the case last described, the regular annuity would be changed to a special one upon the expiration of the waiting period (which would be reduced by section 122 of H.R. 1 (92d Congress, 1st session) from six months to five). The new clause (viii) of section 3(e). In computing a special annuity under present law, the Board is required to take into account not only social security benefits, if any, to which an individual is ́ entitled, but also potential social security benefits to which the individual would have been entitled had he applied for them. In the vast majority of cases, however, involving a potential social security benefit, the individual did not file for such benefit either because he did not know he was entitled to it, or because he preferred to wait till he attains age 65 when he would qualify for an unreduced benefit instead of a reduced benefit between the ages of 62 and 65. Under present law, however, the individual is charged with receiving, a benefit for which he did not even apply. The inevitable result of this is that very few individuals qualify for the special annuity. The new clause (viii) of section 3(e) would relieve the Board of computing social security benefits that would have been paid under the Social Security Act if the beneficiary had applied for them; it provides that, in determining the applicability of the special formula for computing an annuity, the Board . should take into account only such social security benefits to which an individual is actually entitled. The new clauses (ix) and (x) of section 3(e). Under clause (ix), an annuitant's average monthly wage would include only 'his wages and self-employment income through the year before his annuity began to accrue, and railroad compensation up to the date his annuity began to accrue. Presently, when computing the average monthly wage for the special annuity formula, the Board is required under the Social Security Act provisions to include only wages and compensation up to the year the employee retires in the initial computation. Any wages he may have earned in the year he retires and his compensation in that year cannot be used until later in a second computation. Any resulting increase is effective in January of the following year. This is so because, generally, the records of current wages are not immediately available. Since the employee's compensation in the year he retired is available when the annuity is finally certified, the Board could include this compensation in the original computation of the special annuity but is prevented from doing this because of the provision in the Social Security Act. Also, for the purpose of the second computation, the Board obtains the current wage record from the Social Security Administration after they have been posted to their tape records. The added social security earnings generally result in no increase. It is a rare case where taking the latest social security earnings into account will permit the transfer of the regular annuity to a special'onc. To meet this problem the new clauses (ix) and (x) of section 3(e) provide for the inclusion, in new award cases, of an individual's wages and self-employment income only through the, year before his annuity -5 began to accrue. All creditable railroad compensation would be counted up to the date the employee's annuity began. The effect of these would be to reduce the number of computations from two to one. For annuitants on the rolls, social security wages and self-employment income would be used through the end of 1971. In both situations, the average monthly wage and the resulting primary insurance amount would remain fixed, eliminating the need to obtain earnings from the Social Security Administration after the employee retired. The primary, insurance amount would, of course, be increased by any cost-of-living or other increases provided by social security amendments. In survivor cases, 'there would be no change the primary insurance amount will continue to be based on wages and compensation through the year of death. The new clause (ix) would serve another purpose if H.R. 1 (92d Congress, 1st session) were enacted. Under section 110 of H.R. 1, a working married couple, each of whom had at least 20 years of covered service after marriage, could have their creditable earnings combined. If they elect to have their earnings combined, each member would receive a benefit equal to 75 per cent of the primary insurance amount. The provision would be an alternative to present law and would apply only if higher payments would result. The combination of husband's and wife's earnings is intended primarily to benefit persons with very low earnings, and would benefit very few railroad employees. Even though this provision would have little effect on railroad employees, the Board would still be required to make the necessary computations and this would add to the Board's administrative complications. The |