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language in the new clause (ix) that "the average monthly wage for an employee during his lifetime shall include (A) only his wages and selfemployment income ** ** (emphasis supplied); would preclude the

inclusion of his wife's wages.

Section 1(b)

Amendment to the third paragraph of section (e). The amendment which section 1(b) of the bill would make for disabled, widows and widowers is complementary to the amendment made by the new clause (viii)

discussed above. The effect of both amendments is to eliminate the

requirement that individuals be charged with benefits under the Social

Security Act to which they are not entitled.

Section 2

Amendment to the first sentence of section 5(1)(1). Section 216(k) was added to the Social Security Act by the 1967 amendments to waive the nine-month period that a marriage must have existed in order for a

widow, widower, or stepchild to qualify for benefits in cases where the

wage earner's death was accidental or occurred in the line of duty while he was a member of the armed forces. The amendment to section 5(1)(1)

of the Railroad Retirement Act would make it clear that the requirement

is to be waived in such cases in determining eligibility for railroad

retirement benefits as well as social security benefits.

The amendment would serve a further purpose if H.R. I were enacted. Section 216(k) of the Social Security Act would be amended. by section 121

of H.R. I to waive the nine-month marriage requirement in additional

cases

For example, if the annuitant remarries his wife after they

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were divorced and he dies within less than nine months after remarriage,

his widow would qualify for benefits as such without regard to the nine

month requirement. The amendment made to the first sentence of section 5(1)(1) would make this change applicable to the determination of rights to regular annuities, as well as special annuities. Without

the right to the regular annuity, the Board .could not pay the special

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annuity.

Section-3..

This section provides the effective dates of the several provisions in the bill.'

Senator CRANSTON. We have a prepared statement from Senator Mondale, a cosponsor of S. 3852, which will be set forth in the record at this point. PREPARED STATEMENT OF HON. WALTER F. MONDALE, U.S. SENATOR

FROM THE STATE OF MINNESOTA Mr. Chairman, I am pleased to be a cosponsor of S. 3852, Senator Cranston's bill to insure that workers who are covered by the railroad retirement program receive the same 20-percent increase in benefits which Congress recently voted for workers covered by social security.

It is only fair that railroad workers receive a 20-percent increase this September at the same time that social security beneficiaries receive their much-needed increase. Simple justice dictates this.

The last two railroad retirement increases have been delayed for months after social security increases had already been enacted.

In December 1969, Congress voted social security beneficiaries an increase effective in January 1970, but waited until August 12, 1970 a full 7 months—to increase railroad retirement benefits.

Again in 1971, Congress voted social security increases in March but made railroad retirees wait another 4 months for their raise. Keeping railroad retirees waiting for the increase which is due them is totally unfair.

Railroad retirees badly need this 20-percent increase. Average benefits in Minnesota are only $221 per month, and aged widows receive only a pitiful $118 per month. These benefits are clearly inadequateand they are being eroded steadily by inflation. Inflation has eaten up 5.8 percent of the value of railroad benefits just since January 1971, when the last increase became effective.

Under these circumstances, Mr. Chairman, I intend to do everything I can to insure that Congress acts more swiftly this year than it did in 1970 and 1971 to keep railroad retirement benefits in step with the 20percent social security increase. A 20-percent increase for railroad retirees should be enacted immediately.

Senator CRANSTON. Our first witnesses this morning are Mr. Wythe D. Quarles, Jr., management member, Railroad Retirement Board, and Mr. Neil P. Speirs, labor member, Railroad Retirement Board. I welcome you here. I would appreciate it if you would identify those who are with you.

STATEMENT OF WYTHE D. QUARLES, MANAGEMENT MEMBER,

RAILROAD RETIREMENT BOARD, AND NEIL P. SPEIRS, LABOR MEMBER, RAILROAD RETIREMENT BOARD; ACCOMPANIED BY JAMES L. COWEN, CHIEF ACTUARY, AND DAVID B. SCHREIBER, ASSOCIATE GENERAL COUNSEL

Mr. QUARLES. Mr. Chairman, I am Wythe D. Quarles, Jr., management member of the Railroad Retirement Board, and seated to my right is Neil P. Speirs, the labor member of the Railroad Retirement Board.

To my left is James L. Cowen, Chief Actuary; and to the right of Mr. Speirs is David B. Schreiber, Associate General Counsel.

Senator CRANSTON. Thank you. Would you please proceed in whatever fashion

you choose.

Mr. QUARLES. Mr. Chairman, if agreeable with you, since there is no opposition to the technical bill, H.R. 15922, which you have just stated has been passed in the House this morning, I do have a few comments as to the Board's support of this bill. I think maybe we can get this out of the way before we get into S. 3852.

Senator CRANSTON. Fine.

Mr. QUARLES. Mr. Chairman, my association with the Board has been for approximately 1 year. I am here on behalf of H.R. 15922. These are amendments which were drafted by the Board.

The purpose of these amendments is to obtain relief from work involved in administering the special annuity provisions of the Railroad Retirement Act. These are special annuities computed on a family basis, a provision often referred to as the social security minimum guarantee or special annuity.

The purpose of this guarantee is to be assured that benefits paid an employee and his family under both the Social Security Act and the Railroad Retirement Act will be 10 percent more than benefits that would have been paid under the Social Security Act, on the basis of the employees combined earnings under both systems. This provision was enacted into law in 1951.

I might mention that the regular formula annuities to railroad employees are not affected by these amendments. The Commission on Railroad Retirement recently studying the railroad retirement system has stated that the railroad retirement system is the most complicated retirement system in America.

I will now give you a brief summary of the proposed technical changes. They would substantially reduce the number of cases that we now have to process manually after social security amendments.

The recent passage of Public Law 92-336 affected 282,000 railroad retirement cases. Approximately 15 percent, or 42,300, of these cases must be handled manually.

These cases could be processed on our EDP system which would enable us to pay cases that would have to be adjusted quicker and more accurately.

No beneficiaries now on the rolls under the railroad retirement formula immediately will be adversely affected.

No beneficiaries now on the rolls under the overall minimum will be adversely affected now or in the future.

Beneficiaries now on the rolls under the railroad retirement formula will be adversely affected in the future if they are shifted to the overall minimum, or could be shifted to the overall minimum, and they have a divorced wife, a separated wife, or in the event of survivor cases there is a remarried or divorced widow.

The most important change would eliminate the need to take into consideration possible changes in family composition. It is not unusual for us to contact some 300,000 beneficiaries. Recently approximately 125,000 questionnaires had to be reviewed to adjust less than 2,000 cases.

Two other important areas of manual work would be eliminated. There would be no need for the Board to obtain social security wages after an employee retires, or to determine his current insurance status under the Social Security Act.

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As a result, we can pay the cases on the basis of the up-to-date information already in the Board's records without having to refer again to social security. We would use the primary insurance amount which was determined at the time the regular annuity was awarded.

Spouses, minors, disabled or student children, will not be disadvantaged. Divorced wives, separated wives, and, in survivor cases, remarried widows currently computed under the overall minimum formula, will not be disadvantaged; however, under the proposal this category would be excluded in the future from the overall minimum.

Since these persons do not live with the beneficiary, it is difficult to obtain information needed to suspend or adjust benefits.

In conclusion, I would like to state that railroad labor and railroad management support these amendments. The Office of Management and Budget, after conferring with the Social Security Administration and the Commission on Railroad Retirement, has on objections.

This concludes my statement, Mr. Chairman. Mr. Speirs and I hope that you will report this favorably at your earliest convenience.

Senator CRANSTON. Thank you very much. Do you want to proceed now with your general comments.

Mr. SPEIRS. Mr. Chairman, for the record I would like to state that I support the bill.

Senator CRANSTON. You are speaking of the bill he just spoke of?
Mr. SPEIRS. Yes; H.R. 15922.
Senator CRANSTON. Thank you, Mr. Speirs.

May I first ask Senator Schweiker, the ranking Republican Member, if he has any remarks to make at this time.

Senator SCHWEIKER. No, thank you, Mr. Chairman.

Mr. QUARLES. In connection with S. 3852, I appear here to offer the following comments.

S. 3852 would increase benefits under the Railroad Retirement Act on a temporary basis by 20 percent. The purpose of the bill is to give railroad retirement beneficiaries the same percentage increase in benefits as was provided for social security beneficiaries in 1972 by Public Law 92–336. While I understand and sympathize with the fact that inflationary increases in the cost of living impose severe burdens on retired persons living on fixed incomes, I believe that a 20-percent increase in benefits, even on a temporary basis, would be irresponsible at this time. Therefore, I do not favor enactment of this bill.

The overriding consideration in evaluating any specific proposal for an increase in railroad retirement benefits is the effect which the enactment of such a proposal would have upon the actuarial balance of the railroad retirement fund.

The current balance in the fund is roughly $4.6 billion. We have 985,000 annuitants on our rolls. The employment level at the present time is approximately 590,000 employees, and is declining at a rate of approximately 3 percent per year. This is primarily the reason that the railroad retirement fund is suffering an actuarial deficiency.

The railroad retirement fund is maintained solely by tax contributions in equal shares from railroad employers and employees. The present tax rate for railroad retirement is 9.95 percent, with an earnings base of $750 monthly compared to social security, which is 5.2 percent on a $9,000 annual earnings base.

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