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

occurs.

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 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

LA BOR MEMBER, COMMISSION ON RAILROAD RETIREMENT BEFORE THE SUBCOMMITTEE ON RAILROAD RETIREMENT OF THE SENATE COMMITTEE ON LABOR AND PUBLIC WELFARE RELATING TO A PROPOSED 20 PERCENT

INCREASE IN RAILROAD RETIREMENT BENEFITS

(S. 3852)

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 Commission 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 annuitants. That increase was a flat 20% across the board. There are strong

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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 propriety of representatives of the Commission - either the Chairman or myself - in testifying on this topic. The 20 percent increase in Social Security benefits passed Congress on June 30, the day before this Commission 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 Retirement 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 hav done to railway labor's future collective bargaining posture.

In their earlier statement to the House Interstate and Foreign Commerce 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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sooner, but that danger is not immediate -- we still have time to rectify

the situation.

This leads to my second point. The Commission report recommends a complete revamping of the railroad retirement system. Since part of this change involves the economics of our collective bargaining in the future, I would like to place this increase in perspective. If the 20% increase is granted, the Commission has projected that the fund will go broke in 13 years instead of 16 or 17 years. That, on the basis of current conditions, is probably true. The Commission, however, has neglected to take into account the economics of collective bargaining. I am confident that by the time this bill expires in July, 1973 labor and management will have negotiated the changes necessary to bring financial soundness to the system.

In order to establish our purpose and intent in this matter I point to the fact collective bargaining sessions dealing with a revised pension program have already been established. On September 11, 12, & 13 a management team headed by William Dempsey and six representatives of the CRU and RLEA will commence preliminary negotiations. We anticipate bargaining on this issue until we reach agreement. At that time, if agreement is reached, we will make joint recommendations to Congress in line with the basic recommendations of the Commission. We obviously have shown our good intent in taking these steps; we rely on neutrality to get to that point.