1 Begins Oct. 1 and ends Sept. 30, next. Computed without regard to tax credits and deductions from supplemental annuities on account of persions under private plans. These credits and deductions would balance each other so that the progress of the account would not be affected by them. As for the borrowing from the regular Railroad Retirement Account, the committee believes that the amounts borrowed would be repaid well before the period specified in the bill. Thereafter, the regular account would not be called upon to contribute to the new account in any way. FINANCING OF THE 7-PERCENT INCREASE IN REGULAR BENEFIT AMOUNTS The income to the Railroad Retirement Account would be augmented by a new tax of one-half percent of payroll shared equally by employees and employers, and by one-half percent of payroll on employee representatives. This additional income is intended to fianace the selective 7-percent increase in regular railroad retirement benefits on a level basis. The committee believes that the financial arrangements for this part of the bill are satisfactory. AGENCY REPORTS Reports on the bill were filed by the Railroad Retirement Board, the Bureau of the Budget, and the Treasury Department. The Board's report discusses the bill in detail and recommends its enactment. The Bureau's report shows concern about the possible assumption by the Government of some financial responsibility for supplemental annuities after the 5-year period. As shown by the bill, as well as the testimony of the witnesses and the report of the Railroad Retirement Board, the Government assumes no financial responsibility for the supplemental annuities during the 5-year period or thereafter. The Bureau's report also shows concern (as does the report from the Treasury Department) with the exemption by the bill of the supplemental annuities from the Federal income tax provisions. The bill was, however, amended by the House committee to provide against the exclusion of the supplemental annuities from income taxable pursuant to the Federal income tax provisions of the Internal Revenue Code of 1954. The report of the Bureau of the Budget concludes with the statement that if the bill were so amended it would not oppose the bill. All three reports are printed below. HISTORY OF THE LEGISLATION The bill, H.R. 17285, was introduced by the chairman of the Subcommittee on Finance of the House Committee on Interstate and Foreign Commerce on August 25, 1966. The companion bill, S. 3777, was introduced on August 26, 1966, by the chairman of the Subcommittee on Railroad Retirement, of the Senate Committee on Labor and Public Welfare. Hearings on the House bill were held by the House subcommittee in the morning of September 27, 1966; and hearings on the Senate bill were held by the Senate subcommittee in the evening of the same day. At both hearings the same amendments were offered to each bill. The measures and offered amendments were supported by witnesses for the Railroad Retirement Board, representatives of railroad labor and railroad management and other interested parties. There was no testimony against the bill. The chairman of the Subcommittee on Railroad Retirement of the Senate Committee on Labor and Public Welfare noted that placing the administration of the supplemental annuity plan with the Railroad Retirement Board would further increase the differences between that Board and the social security system. This new administrative function could work against the eventual amalgamation of the two systems, which, the chairman believes, should be given consideration. The House Committee on Interstate and Foreign Commerce reported favorably on the bill, with the amendments, and the House passed H.R. 17285, as reported, on October 3, 1966. The Senate Subcommittee on Railroad Retirement considered and adopted the offered amendments to the Senate bill and reported it favorably with amendments to the Senate Committee on Labor and Public Welfare on October 5, 1966. As so reported, S. 3777 is identical with H.R. 17285 as passed by the House. The committee is therefore reporting H.R. 17285 as it was passed by the House. EXPLANATION OF THE BILL BY SECTIONS TITLE I Section 1. This section of the bill would add a new subsection (j) at the end of section 3 of the Railroad Retirement Act to provide for the supplemental annuities. These annuities would be payable to those individuals who (i) are entitled to an annuity under section 2 of the Railroad Retirement Act of 1937 (except a spouse's annuity), (ii) have a current connection with the railroad industry at the time the annuity under such section 2 begins to accrue, (iii) have attained the age of 65, and (iv) have completed 25 or more years of service. In determining the years of service an ultimate portion of a year of 6 or more months would count as a year just as in the case of determinations with respect to regular annuities. The supplemental annuity would be in the amount of $45 a month plus an additional amount of $5 for each year of service credited to the individual in excess of 25 years but the amount would be limited to $70 even though the individual has more than 30 years of creditable service. If the individual becomes entitled to a regular annuity on other than the first day of a month and a supplemental annuity for the same 1 Begins Oct. 1 and ends Sept. 30, next. 2 Computed without regard to tax credits and deductions from supplemental annuities on account of pensions under private plans. These credits and deductions would balance each other so that the progress of the account would not be affected by them. As for the borrowing from the regular Railroad Retirement Account, the committee believes that the amounts borrowed would be repaid well before the period specified in the bill. Thereafter, the regular account would not be called upon to contribute to the new account in any way. FINANCING OF THE 7-PERCENT INCREASE IN REGULAR BENEFIT AMOUNTS The income to the Railroad Retirement Account would be augmented by a new tax of one-half percent of payroll shared equally by employees and employers, and by one-half percent of payroll on employee representatives. This additional income is intended to fianace the selective 7-percent increase in regular railroad retirement benefits on a level basis. The committee believes that the financial arrangements for this part of the bill are satisfactory. AGENCY REPORTS Reports on the bill were filed by the Railroad Retirement Board, the Bureau of the Budget, and the Treasury Department. The Board's report discusses the bill in detail and recommends its enactment. The Bureau's report shows concern about the possible assumption by the Government of some financial responsibility for supplemental annuities after the 5-year period. As shown by the bill, as well as the testimony of the witnesses and the report of the Railroad Retirement Board, the Government assumes no financial responsibility for the supplemental annuities during the 5-year period or thereafter. The Bureau's report also shows concern (as does the report from the Treasury Department) with the exemption by the bill of the supplemental annuities from the Federal income tax provisions. The bill was, however, amended by the House committee to provide against the exclusion of the supplemental annuities from income taxable pursuant to the Federal income tax provisions of the Internal Revenue Code of 1954. The report of the Bureau of the Budget concludes with the statement that if the bill were so amended it would not oppose the bill. All three reports are printed below. HISTORY OF THE LEGISLATION The bill, H.R. 17285, was introduced by the chairman of the Subcommittee on Finance of the House Committee on Interstate and Foreign Commerce on August 25, 1966. The companion bill, S. 3777, was introduced on August 26, 1966, by the chairman of the Subcommittee on Railroad Retirement, of the Senate Committee on Labor and Public Welfare. Hearings on the House bill were held by the House subcommittee in the morning of September 27, 1966; and hearings on the Senate bill were held by the Senate subcommittee in the evening of the same day. At both hearings the same amendments were offered to each bill. The measures and offered amendments were supported by witnesses for the Railroad Retirement Board, representatives of railroad labor and railroad management and other interested parties. There was no testimony against the bill. The chairman of the Subcommittee on Railroad Retirement of the Senate Committee on Labor and Public Welfare noted that placing the administration of the supplemental annuity plan with the Railroad Retirement Board would further increase the differences between that Board and the social security system. This new administrative function could work against the eventual amalgamation of the two systems, which, the chairman believes, should be given consideration. The House Committee on Interstate and Foreign Commerce reported favorably on the bill, with the amendments, and the House passed H.R. 17285, as reported, on October 3, 1966. The Senate Subcommittee on Railroad Retirement considered and adopted the offered amendments to the Senate bill and reported it favorably with amendments to the Senate Committee on Labor and Public Welfare on October 5, 1966. As so reported, S. 3777 is identical with H.R. 17285 as passed by the House. The committee is therefore reporting H.R. 17285 as it was passed by the House. EXPLANATION OF THE BILL BY SECTIONS TITLE I Section 1. This section of the bill would add a new subsection (j) at the end of section 3 of the Railroad Retirement Act to provide for the supplemental annuities. These annuities would be payable to those individuals who (i) are entitled to an annuity under section 2 of the Railroad Retirement Act of 1937 (except a spouse's annuity), (ii) have a current connection with the railroad industry at the time the annuity under such section 2 begins to accrue, (iii) have attained the age of 65, and (iv) have completed 25 or more years of service. In determining the years of service an ultimate portion of a year of 6 or more months would count as a year just as in the case of determinations with respect to regular annuities. The supplemental annuity would be in the amount of $45 a month plus an additional amount of $5 for each year of service credited to the individual in excess of 25 years but the amount would be limited to $70 even though the individual has more than 30 years of creditable service. If the individual becomes entitled to a regular annuity on other than the first day of a month and a supplemental annuity for the same month, the supplemental annuity would not begin to accrue earlier than the day on which his regular annuity began to accrue, and the amount of the supplemental annuity for that month would be reduced by one-thirtieth of the amount otherwise payable as a supplemental annuity for each day of such month with respect to which he does not qualify for the regular annuity. The supplemental annuity would be subject to the same provisions of subsection (d) of section 2 of the Railroad Retirement Act as is the individual's regular annuity under such section 2. These provisions relate to the loss of annuity payments for months because of work during such months for an employer or the last person (even though not an employer) by whom the individual was employed before his regular annuity began to accrue. An individual's supplemental annuity will not be taken into account in determining any other benefits under the Railroad Retirement Act of 1937 (such as a spouse's annuity, an annuity under the social security guaranty provision in section 3(e) of the act, and the residual lump-sum benefit under section 5(f) (2) of the act), except that the 7-percent increase of regular annuity amounts would, with an exception, not be applicable to an individual's regular annuity for months with respect to which he is entitled to a supplemental annuity. The exception is that where a supplemental annuity is payable but because of a reduction by reason of entitlement to a supplemental pension to an amount less than the 7-percent increase in the regular annuity, the regular annuity would be increased to the extent required to make the regular annuity plus the supplemental annuity equal to the amount of the regular annuity which would have been payable had there been no entitlement to a supplemental annuity. Paragraph (2) of the new subsection (j) of section 3 of the Railroad Retirement Act would require reduction of the supplemental annuity of an employee (other than an employee of a railway-labor-organization employer) with respect to any month by the amount of the supplemental pension which is attributable to the employer's contribution that such employee is entitled to receive for that month under any other supplemental pension plan of an employer (other than a railway-labor-organization employer). When made, however, the reduction would be limited where such pension is reduced by reason of the supplemental annuity to which such individual is entitled under the provisions of this subsection. The limitation would be to the amount of the supplemental annuity minus the amount by which the supplemental pension is so reduced. For example, where an individual's pension from an employer is reduced for a month from $100 to $80 by reason of his rights to a supplemental annuity, the amount of his supplemental annuity of, say, $70 before the reduction, would be reduced by $50 ($70-$20) to $20 ($70-$50). This would in effect restore the loss in his supplemental pension. The reduction could in no case exceed for a month the amount of the supplemental pension an individual is entitled to receive for that month which is attributable to the employer's contribution. For example, take the case of an individual who, without regard to the supplemental annuity program, is entitled to a supplemental pension of $100 a month, one-half of which (or $50) is attributable to the employer's contribution; because of his rights to a supplemental annuity, the employer has reduced the amount of the pension attributable to the em |