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are increased for beneficiaries under the Social Security Act.

This was the case in 1966, 1968, 1970, and again in 1971.

In

all these instances, the benefits were increased to meet the

increased cost of living and, obviously, railroad retirement

beneficiaries are in the same position in this respect as are

social security beneficiaries.

The Commission on Railroad Retirement is in the process

of issuing its report to the Congress in which it will make

recommendations with regard to benefits, and their financing,

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may be necessary as a result of the railroad retirement system's

financial condition would be enacted very quickly, and it

would be highly inequitable to deny to railroad retirement

annuitants in the meantime the same percentage increases that

have been extended to social security beneficiaries. Any delay

in railroad retirement benefit increases would be particularly

unta ir in light of the fact that railroad employees have paid

much higher taxes in support of the railroad retirement system

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than other employees have paid in support of the social security system.

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With respect to the temporary nature of the increase

proposed by the bill, the Board's report estimates that if the

20 per cent increase and the previous 15 per cent and 10 per

cent increases are allowed to expire on June 30, 1973, the

railroad retirement system would be operating with an actuarial surplus of $87.5 million per year.

That being true,

I see no reason why the 20 per cent increase proposed by the

bill should not be a permanent increase, and I recommend that

the bill be amended to so provide.

I realize, of course, that

the adoption of such an amendment would create a deficit in

the system if the cost of a permanent 20 per cent increase were

estimated in perpetuity. However, I consider any such estimate

in perpetuity to be extremely unrealistic because the histories

of both the railroad retirement and social security systems

demonstrate beyond doubt that substantive changes are made

almost bi-annually in the financing of the programs.

At this point I would like to comment on one other provision

of the bill.

At the present time section 4 of Public Law 92-46,

approved July 2, 1971, gives the Railroad Retirement Board the

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authority to determine the percentages to be applied to social

security benefits at their present level in order to obtain the

dollar amounts of the reductions required to be made from

certain railroad retirement annuity increases.

The reductions

referred to are made only in cases where individuals are

entitled to benefits under both the Railroad Retirement Act and

the Social Security Act.

In such cases the law provides, in

general, that the increases provided by the 1966, 1968, and

1970 railroad retirement amendments are to be reduced by the

approximate amount of the increases which the individuals

received in their social security benefits as a result of the

social security amendments of 1965, 1967, and 1969.

Without the authority provided by section 4 of Public

Law 92-46, the Board would have to obtain social security wage

records and calculate, in each particular case, what an

individual's social security benefit would have been prior to

the 1969 social security amendments.

This process would be

exceedingly time-consuming and expensive for the Board since

the information necessary to make the required calculations

could not be obtained from the Social Security Administration.

Thus, while the authority in question is needed, and will

continue to be needed, to avoid an unnecessary and costly

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administrative burden, section 4 of Public Law 92-46 will, in

accordance with section 8(b) of that public law, cease to be

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applicable after June 30, 1973.

Section 4 of this bill

includes a provision which is virtually identical to section 4

of Public Law 92–46, thereby insur ing that the Board's author ity

in this regard would continue after June 30, 1973.

This pro

vision does not affect the cost of the benefit increases

proposod.

This concludes my statement, Mr.

Chairman.

I hope that

the bili will be enacted as soon as possible.

As I have

stated, I favor an amendment to the bill which would provide

I

the benefit increase on a permanent basis.

However, if the

adoption of such an amendment would delay enactment of the bill,

I would prefer that the bill be acted upon without amendment

so that the increases to railroad retirement beneficiaries

will not be delayed.

zero.

Senator CRANSTON. Senator Schweiker, do you have any questions? ? Senator SCHWEIKER. Mr. Mittelman, our minority counsel, would like to ask a question.

Mr. MITTELMAN. I would like to clarify one thing for the record. As I understand it, if we were to adopt a pass-through increase, the net effect on the fund would be zero; it would not either increase or decrease the actuarial deficit of the fund.

Perhaps Mr. Cowen would answer that question.
Mr. Cowen. It would be very close to zero. It might not be exactly

I have figures here some place, but I know it would be less than $10 million a year either way.

Mr. MITTELMAN. That is because of the financial interchange provisions in the law now?

Mr. CoWEN. Correct.

Mr. MITTELMAN. Also, this is what the Commission recommends in its report, is it not?

Mr. Cowen. I believe there was a divided view on that particular point. I believe the Commission members will be testifying, and I would rather let them speak for themselves.

Senator SCHWEIKER. I have no other questions.
Senator CRANSTON. Thank you very much.
Senator Taft, we welcome you to the hearing.

Our next witness is Theodore 0. Yntema, Chairman, Commission on Railroad Retirement.

STATEMENT OF THEODORE 0. YNTEMA, CHAIRMAN, COMMISSION

ON RAILROAD RETIREMENT, ACCOMPANIED BY MICHAEL S. MARCH, EXECUTIVE DIRECTOR

Mr. YNTEMA. Thank you, Mr. Chairman.

Senator CRANSTON. I understand you are accompanied by Dr. Michael March.

Mr. YNTEMA. Yes, and may I say that I am glad Mr. Cowen is in the audience. If there are highly technical questions, with your permission I will call on him to answer them.

Senator CRANSTON. Yes. We are going to have to recess for a rollcall. (Recess.)

Senator Cranston. The hearing will please come to order. I apologize for the delay. I will appreciate your indulgence while Senator Schweiker presides briefly. I must make one urgent telephone call. Mr. YNTEMA. Thank you. I am most grateful for this opportunity

before the more so since I was denied such an opportunity on the hearings on corresponding legislation in the House Committee on Interstate and Foreign Commerce.

I am pleased therefore to present to you the findings of the Commission on railroad retirement that have a bearing on S. 3852. This bill, as you know, will provide an across-the-board 20-percent increase in benefits under the Railroad Retirement Act.

My statement is divided into two parts: First, a summary of the Commission's findings as they relate to the present bill. Second, an analysis of S. 3852 in the light of the Commission's findings and recommendations.

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