H.R. 4844 marked-up in the House
Mark-up was expected on July 19 for H.R. 4844 -- the long-awaited legislation to provide tax and benefit changes in the Railroad Retirement Act -- in the House Transportation and Infrastructure and Ways and Means Committees.
The bill would provide the following benefits for railroad workers: improvement of widows' and widowers' annuities; elimination of the actuarial reduction for railroad workers with 30 or more years of service who retire between age 60 and age 62; a reduction in the number of years required to vest in Railroad Retirement from 10 to five; and elimination of the Railroad Retirement maximum benefit.
Savings for the industry would come from the elimination of the Supplemental Annuity Tax and a reduction of three percentage points in employer Tier II tax rates, which will be phased in over three years. The bill also would create a "ratchet" for Tier II tax rates beginning in 2003, which is designed to ensure that funds are available in a range between four and six times that required to pay benefits in any given year.
While the BLE has been supportive of the benefit improvements contained in a deal reached earlier this year between 11 unions and the Class I carriers, it has been critical of the tax aspects of the agreement, which would provide the industry with a windfall of over $400 million annually. The BLE also has opposed any private investment of Tier I taxes.
The benefits provisions of H.R. 4844 deserve favorable consideration and the BLE supports them; however, the language of H.R. 4844 contains a number of new provisions that did not appear in previous drafts and, therefore, are a source of concern.
First, the bill appears to privatize Tier II, because the Railroad Retirement Investment Trust -- the entity that will manage and invest the assets of the Railroad Retirement Trust Fund, which will contain all Tier II revenues not needed to pay current administrative expenses of the Railroad Retirement Board and all Tier I revenues not needed to pay current benefits -- is not subject to Title 31 of the United States Code. Thus, the Trust will not be a government agency, as the Railroad Retirement Board currently is, and it is uncertain whether the Trust's status is as secure as the Railroad Retirement Board is today.
Second, payment of Railroad Retirement benefits would no longer be made by the U.S. Treasury, at the direction of the Railroad Retirement Board. Instead, the Railroad Retirement Board, in consultation with the Railroad Retirement Investment Trust, will retain a non-governmental financial institution to serve as disbursing agent for benefits. That disbursing agent will receive Tier I and Dual Benefit Payment benefits from the Treasury, at the direction of the Railroad Retirement Board, and Tier II and Supplemental Annuity benefits from the Railroad Retirement Trust Fund, and will make payments to all annuitants.
Third, there remains a question concerning investment of Tier I -- or Social Security Equivalent Benefit Account (SSEBA) -- funds. Today, that portion of SSEBA required to pay current benefits is kept liquid, and no Railroad Retirement funds may be invested, except in securities backed by the full faith and credit of the federal government. Section 107(c) of the bill would require the transfer of that excess into the Railroad Retirement Trust Fund, and appears to keep the present limitation on investment. This raises questions why this provision is necessary.
There also is a series of questions concerning liability and enforcement that need to be aired. The Railroad Retirement exemption from ERISA is continued, with a new legal standard and provisions for providing liability insurance for trustees. Who has standing to bring a lawsuit against the trustees: the Railroad Retirement Board; the industry; unions; individual retirees? We simply don't know, because the bill is unclear.
Until hearings are held and the issues with which we are concerned are taken up in public debate, it will not be possible for the BLE to evaluate whether those concerns have been addressed and, if so, the adequacy of their treatment. The bill will be marked-up in the House without hearings, but the Senate is expected to hold hearings when it takes up the legislation.
© 2000 Brotherhood of Locomotive Engineers