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and we do not intend to let the plan go broke—but we do intend to negotiate with all of management on this question.
I see no other way of settling this thing. I did not agree that we should ask for Government subsidies because I do not think there would be any chance of getting them until social security is given a subsidy.
We have $5.5 billion. Social security has about $45 billion or $50 billion, maybe nine times as much money, but they have 100 times as inany people. They pick up an additional million people a year in social security.
That is the only reason they are on a sound financial basis, and because it is on a pay-as-you-go plan more or less, but we have to get this plan sound for a 20- or 30-year period. I recognize this.
I recognize that we cannot mislead or misrepresent the people in a plan such as this, and that will certainly be our goal in direct bargaining sessions with the top bargaining team representing management commencing September 11, 12, and 13.
I have deviated from this written text of my statement.
Senator CRANSTON. The entire prepared statement will go in the record, of course, as you submitted it at the end of your testimony.
Mr. DENNIS. Yes. If it is included, I can wind this up pretty fast.
As a member of the Commission on Railroad Retirement, I am concerned about the whole retirement system. As a working man I am concerned about the effect of any changes on my members before the report is acted upon by Congress.
In the first instance, as a Commission member I accept the fact that the current system is liable to go broke by 1988 unless certain changes recommended by the Commission are made.
As a member of the Commission on Railroad Retirement, I am concerned about the whole retirement system; as a workingman I am concerned about the effect of any changes on my members before the report is acted upon by Congress. In the first instance as a Commission member—I accept the fact that the current system is liable to go broke by 1987 or 1988, unless certain changes recommended by the Commission are made. Í estimate that if the full 20 percent is applied to all rail workers the plan might go broke a few years sooner. Since my fellow Commissioners have already agreed to change the system, that point does not appear important. However, on a current basis, there is still approximately $5.5 billion in the fund and even after the temporary percent increase is accomplished there will be no material reduction in the fund during the next 10 months.
So far I have been talking as a Commission member and about the possible effects of a benefit increase. Now I would like to talk as a workingman and the established facts of benefits and contributions.
Under current law every time social security taxes are raised our taxes atuomatically go up. As things stand now, in January 1973, our people will start paying 10.25 percent of their pay into the retirement fund. For many of our people that will be a monthly contribution of $92.25. If we don't do anything else from here on in by January 1, 1974 the wage base will go up to $12,000 and our people will be paying $102.50 per month. .
This is a rate nearly double that paid by workers covered under social security. They will pay 5.5 percent beginning January 1973 with a maximum of $49.50, while our people will be paying 10.25 percent
and on January 1, 1974, with a $12,000 wage base, their maximum will be $55 as compared with the $102.50 for railroad employees. The social security maximum will be $55.
My people-people who work and pay these huge amounts—ask the question, that if we have to pay almost twice as much as social security why don't we get twice as much as social security? The Commission has even acknowledged that the railroad retirement system has been changed into a family income maintenance program. But do we get annuities that are twice as high as social security? No.
I make a comparison here of $161. Two times that would amount to $322, while the average benefit for a single worker under railroad retirement, including supplemental benefits, will be only $289. The same ratios hold true for married workers : $270 per month under social security contrasted with $393 a month under railroad retirement.
The logic of my working people is that if the contribution rate goes up automatically and if railroad retirement is already a family income maintenance system, until the Congress changes everything, benefits should be increased by the same percent. To do anything less will be an injustice to the workingman and will have destroyed the explicit promise of the Commission not to interfere in the collective bargaining process.
The Commission has definitely indicated that they did not want to interfere in collective bargaining process between management and labor, but certainly that is exactly what they are doing by the recommendation that they have made to this committee today.
Mr. Chairman, thank you for your indulgence on my remarks. I will be glad to answer any questions.
Senator CRANSTON. Thank you very much. I thank you for stating you own views in the way you did on methods which would make the retirement system more adequate. You have stated your position very clearly.
I would liketo ask you just one question. While challenging the precision of the actuarial projections that have been cited in regard to the prospects for the fund, you do grant twice in your prepared text, and also in your verbal presentation, that the fund is in difficulty.
On page 3 you say the projection by the Commission is that it will go broke in 13 years instead of 16 or 17 if the 20-percent increase
You grant that is probably true under present conditions, and then you say that the Commission has not taken into account the economics of collective bargaining, and you express confidence that by the time the bill expires in June 1973, labor and management will have negotiated the changes necessary to bring financial soundness to the system.
If you can, without revealing what you are going to do in negotiations, give us any clue as to what you feel generally can be done to bring about financial soundness of the system, it would be appreciated.
Mr. DENNIS. I think that we recognize that this is a cost factor. We recognize the carriers will have to absorb $47.50 a month which is now being paid by the employees. In other words, the difference between $55 a month which the Social
a Security people will be paying and $102.50 which the railroad retirement people will be paying, commencing January 1, 1974, is a difference of $47.50 a month.
We think that the carriers should pick that cost up, just the same as the steel industry, or the same as the auto industry, or any other heavy industry which is highly organized, as we are.
They have their supplemental pension plans which are paid for entirely by the company. We know there are various ways and means that can be done. That can be done by levying an increase in freight rates which needs ICC approval.
We think this has been a rather long cumbersome problem for the railroads in many instances, but then we think there are such things as the proposal we made that the shipper's tax be applied. I made this proposal at meetings with the Commission. I have not proposed that there be any subsidies granted by the Government, because I think we have to accept the fact that there is no hope of getting a Government subsidy until one is granted to Social Security.
By getting in under the social security plan for the first year of our pension system, which the Commission has proposed we do, if a subsidy would subsequently be granted by Congress to Social Security, we would then also be the beneficiaries of that subsidy.
But you asked what we propose to do in negotiations. I have negotiated many agreements during my lifetime with Mr. Dempsey, with Mr. Menk, and with various other of the railroad presidents, and I believe if all the cards are laid on the table and things are accepted as they really are, and we know that there is a cost factor-we know it is a cost factor, just like hospitalization is a cost factor; vacations are a cost factor-all of these items which are subject to collective bargaining are cost factors.
We intend to recognize the fact that these are cost factors.
I think that the six men on our committee are realistic people. We represent the people from the Congress of Railroad Unions, and then the RLEA unions are represented, and the signal men are represented, and the yard masters.
We, of course, have about 21 labor unions that we have to keep in contact with, but we will propose a plan that we realize this would be a terrific cost factor if the carriers had to absorb this all at once on the date of changeover. We have an open mind on this.
We are willing to recognize a reasonable period of time over which they could pick up this additional cost. I think that I have already told this to management, to the management representative on the Commission. I have told it to the Commission, and the Commission I believe really feels that we can do a job in direct negotiations. But this is not in the posture today.
I think you could tell that from the complex presentation that was made by Dr. Yntema who is a very brilliant man. It is not in a posture where Congress can deal with the question in detail, because there is so much more involved.
The question of dual benefits I agree, representing labor, new hires on the railroads—these would not qualify for dual benefits, but people who have vested rights, who had already earned dual benefits would have to continue to get them.
We don't want to walk away from anybody who is on pension or people who have an equity in the plan. These are the problems that will have to come up in the negotiations of the second-tier level of benefits.
(The prepared statement of Mr. Dennis follows:)
August 9, 1972
STATEMENT OF C. L. DENNIS
RELATING TO A PROPOSED 20 PERCENT
My name is C. L. Dennis. I am International President of the
Brotherhood of Railway and Airline Clerks Union and a member of the
U.S. Commission on Railroad Retirement,
I have come to testify today on behalf of a twenty percent increase
in retirement benefits for railroad workers and beneficiaries as a mem
ber of the U.S. Commission on Railroad Retirement. I speak as a
member who holds a minority viewpoint distinct from that of the majority
on this particular issue. An informal count of the members of that Com
mission would indicate that three out of five members constitute the
majority while two members agree on the minority position on this issue.
I emphasize this to indicate that on this issue the breakdown is very close.
The purpose of these hearings is to discuss S. 3852, and similar
bills, in order to provide the same percentage increase to railroad
workers and retirees as was recently provided for Social Security annu
itants. That increase was a flat 20% across the board. There are strong
and logical arguments to be made for granting that same percentage in
crease to railroad annuitants.
Before I begin on that, however, I would like to comment on the
myself - in testifying on this topic. The 20 percent increase in Social
Security benefits passed Congress on June 30, the day before this Com
mission was due to make its report. That report, currently being printed,
stresses a significant point which I hold to be inviolate
that the Commission
would not let its report influence the future collective bargaining process
which will be necessary as a result of the changes in the Railroad Re
tirement system which the report recommends and to which I subscribe.
Their participation in these hearings, preceeding publication of the report
of the Commission, violates our previous agreement in that this twenty
· percent increase represents a direct and vital collective bargaining factor.
That is the main reason I am here today - to mitigate the damage they havr
done to railway labor's future collective bargaining posture.
In their earlier statement to the House Interstate and Foreign Com
merce Committee, the Commission projected continuing deficits until the
year 2000 as a result of a 20% increase. Since I anticipate this point being
repeated today, I would like to make two points regarding that projection.
In the first instance the Commission projects the fund going broke a few
years earlier as a result of the 20 % increase. I agree that it might happen
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