-4 Honorable Harrison A. Williams, Jr. S. 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 one. 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 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 costof-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 percent 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 -5 Honorable Harrison A. Williams, Jr. S. 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 language in the new clause (ix) that "the average monthly wage for an employee during his lifetime shall include (A) only his wages and self-employment income ***" (emphasis supplied), would preclude the inclusion of his wife's wages. Section 1(b) Amendment to the third paragraph of Section 3(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. 1 were enacted. Section 216 (k) of the Social Security Act would be amended by section 121 of H.R. 1 to waive the nine-month marriage requirement in additional cases. For example, if the annuitant remarries his wife after they 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 annuity. Section 3 This section provides the effective dates of the several provisions in the bill. -6 Honorable Harrison A. Williams, Jr. S. The amendments proposed by the bill were discussed with representatives of railroad management (Association of American Railroads) and railroad labor (Congress of Railway Unions and Railway Labor Executives' Association), who are in favor of the bill. Because of the urgency of the enactment of these technical amendments, this report is being submitted without prior clearance from the Office of Management and Budget, which, however, has cleared the submission of the bill to Congress. The Office of Management and Budget is being furnished copies of this report and you will be informed of its views as soon as they are received. Senator CRANSTON. I have one more question. In view of the Commission's recommendations would you recommend consideration of the pass-through type of increase which was enacted in 1968, rather than the 5-percent increase recommended by the President. Mr. SPEIRS. I would recommend of course the increase that is provided for in this bill, I would like to point out, Mr. Chairman. Senator CRANSTON. Suppose you had to choose between the two, between the pass-through or the 5-percent increase that the President now proposes, taking into account his opposition to a 20-percent increase, which then raises the question of whether there would be a veto if we passed a 20-percent increase, and what would happen thereafter. Mr. SPEIRS. What was the first choice? Senator CRANSTON. First, taking into account that we have that letter, taking into account that the President may veto; then taking into account that that leaves a question as to the fate of this legislation thereafter. Mr. SPEIRS. Yes. Senator CRANSTON. Suppose you had to choose between the 5 percent increase the OMB proposed or the pass-through type of increase, similar to that which was enacted in 1968; if you had that choice, what would your position be? Mr. SPEIRS. Of course if I had to make a choice on those two bases, I would favor the highest increase, which would apparently be the passthrough type of increase. If I may, I would like to add one thing that is rather disturbing to me, that is the fact that on January 1 of this year all railroad employees will commence to pay an increased tax of $17.62 per month. This is based on the fact that the taxable base goes up from $750 to $900 per month. I find it awfully difficult to deny railroad employees the increase proposed by the bill, especially in the light of the $17.62 increase in their tax. I think this is worthy of consideration. Senator CRANSTON. Thank you very much. (The prepared statement of Mr. Speirs follows:) STATEMENT OF NEIL P. SPEIRS, LABOR MEMBER August 9, 1972 Mr. Chairman and Members of the Committee: My name is Neil P. Speirs. I am the Labor Member of the Railroad Retirement Board.. The bill S. 3852 would increase annuities and pensions under the Railroad Retirement Act by 20 per cent, similar to the 20 per cent increase in monthly social security benefits which has recently been provided by Public Law 92-336. The 20 per cent railroad retirement benefit increase would, like the corresponding social security benefit increase, be effective with respect to annuities accruing for months after August 1972. The railroad retirement benefit increase, however, would be only a temporary increase; it would cease to be effective as of the close of June 30, 1973 - the date when the 15 per cent increase enacted in 1970 and the 10 per cent increase enacted in 1971 would also terminate. I favor the bill except for the provision which would terminate the increase as of June 30, 1973. Congress has established a solid precedent over the past several years of increasing benefits for beneficiaries under the Railroad Retirement Act at about the same time that benefits |