benefit based on the survivor's own earnings. An additional amount may be payable to a widow or widower who had "vested rights" to benefits under both railroad retirement and social security as of December 31, 1974.

The new law contains a grandfather clause insuring that no individual who retires (or first begins receiving benefits) within the next 8 years will receive less than he or she would under the formula in the previous law.

Relationship of benefit amount to cost of living.-Cost of living adjustments are provided.

Relationship of benefit amount to place of residence.-The benefit formula is applied uniformly regardless of place of residence.

Benefit amounts.-The combined employee and spouse annuities are subject to a maximum which, in a case where the employee has maximum earnings, will, generally speaking, limit combined employee and spouse annuities to the greater of: (1) $1,200 a month; or (2) 90 percent of the employee's taxable earnings.

The maximum for a spouse benefit alone was $225.70 in June 1974. This maximum will increase over time.

In no case will a retired or disabled worker, a spouse or a survivor receive less than 110 percent of the amount he/she would have received under social security based on a combination of railroad and social security earnings in the new law.

OTHER BENEFITS PROVIDED OR AVAILABLE

Death benefit. If there are no survivors entitled to a monthly benefit in the month in which the insured worker died, an amount normally equal to 10 times the basic amount is payable; or, if the monthly survivors' benefits paid during the first year after the worker's death are less than the death benefit, the difference is paid to the survivor.

Residual payment.-A residual payment is made when entitlement to all other types of railroad benefits has ended if the employee's contribution under railroad employment through 1974 has not been exhausted by railroad or OASDI benefit payments.

RELATIONSHIP TO BENEFITS PROVIDED UNDER OTHER PROGRAMS.Under the 1974 amendments, dual railroad retirement and social security benefits are generally eliminated for the future. However, a grandfather clause protects the rights of people who became entitled to annuities prior to 1975 and of those with long railroad employment. who could have been entitled to both a railroad and a social security benefit under the law in effect prior to 1975. For those receiving both social security and railroad retirement benefits, the social security level component of the railroad retirement benefit is reduced by the amount of any monthly social security benefit.

No one may receive survivors benefits under both railroad retirement and social security based on the earnings record of the same person.

The supplemental benefit is reduced by the amount of any private railroad pension attributable to the employer's contribution.

SUPPLEMENTARY MATERIAL

TABLE 1.-COMPARISON OF EMPLOYEE RETIREMENT INCOME UNDER THE 1974 AND 1937 RAILROAD RETIREMENT ACTS, INCLUDES EFFECT OF SOCIAL SECURITY BENEFITS

2 May.

3 Additional earnings of $900 in 1 month of 1975 for examples I and II. 4 $70 would have been payable when employee reached age 65.

Note. For example I the average monthly wage (computed under social security provisions) based on railroad compensation was $450. For example II the average monthly wage based on combined railroad and social security earnings through 1974 was $540; on railroad only, $410; and on social security only, $165. Example III last worked in railroad industry in 1963 and his windfall is based only on earnings through that year: Averages for windfall are $195 based on railroad or on combined earnings and $43 based on social security earnings; for all service prior to 1975, average wage of $450 under social security coverage and $530 on combined earnings.

Source: "Railroad Retirement Board Quarterly Review," Jan. 10, 1975.

TABLE 2.-COMPARISON OF WIVES' AND WIDOWS' ANNUITIES UNDER THE 1974 AND 1937 RAILROAD RETIREMENT

1 Based on employee example II, assumes she is not insured on her own earnings.

2 Based on employee example I, for social security insured case assumes all of her earnings were before 1975.

3 February.

4 May.

5 One-half of corresponding amounts for employee.

Source: See table 1.

FEDERAL-STATE UNEMPLOYMENT COMPENSATION

SYSTEM 1

BASIC PROGRAM INFORMATION

LEGISLATIVE OBJECTIVE.—To provide cash benefits on a regular basis to normally employed workers during limited periods of involuntary unemployment.

DATE ENACTED AND MAJOR CHANGES SINCE ENACTMENT. This program was enacted in 1935 as part of the Social Security Act and it was amended in 1939 to provide an employer's payroll tax base of $3,000. In 1954, unemployment compensation for Federal civilian employees was added; in 1958, unemployment compensation for exservicemen was provided; and amendments in 1970 and 1971 provided for extended unemployment compensation during periods of high unemployment.

The Federal payroll tax for the three Federal-State programs has been increased from 3 percent to 3.1 percent, effective January 1, 1961, and from 3.1 percent to 3.2 percent, effective January 1, 1970. Major changes in the 1970 amendments included the following: (1) An extension of coverage to 4.8 million additional jobs; (2) the establishment of a permanent program of extended benefits for persons who exhaust their regular State benefits during periods of high unemployment; and (3) an increase in the taxable wage base from $3,000 to $4,200 for calendar years 1972 and thereafter. In December 1971, an act was passed temporarily providing for extended benefits for persons in States with exceptionally high unemployment rates.

Legislative action in December 1974 established a temporary program of emergency benefits in addition to the extended benefits program (this is similar to the emergency extended unemployment compensation program in effect in 1972). Separate legislation also established a temporary program to provide up to 26 weeks of benefits to unemployed persons whose jobs were not covered by unemployment insurance laws.

ADMINISTERING AGENCY.-The program is administered by the Manpower Administration of the U.S. Department of Labor through State jurisdictions. Each State has an employment security agency which administers the State program through its local offices. In addition, the District of Columbia, Puerto Rico, and the Virgin Islands have programs comparable to the State programs.

FINANCING

Federal-State unemployment insurance (State UC).--This program is financed by Federal and State payroll taxes on employers. There is a Federal tax with a gross rate of 3.2 percent on the first $4,200 of wages

1 This system includes the following programs:

(1) Federal-State compensation.

(2) Federal-State permanent extended compensation.

(3) Compensation for ex-servicemen.

(4) Compensation for Federal civilian employees.

an employer pays to each worker in a year. Subject employers who pay their taxes under approved State UI laws may take credit of 2.7 percent against this Federal tax, leaving a net Federal tax of 0.5 percent. This net Federal tax is earmarked for Federal and State expenses of administering the employment security program, for the Federal share of the Federal-State extended unemployment compensation program, and for repayable noninterest bearing advances to States which run out of State funds to pay benefits.

The States also collect an employer payroll tax, which is used only for the payment of unemployment compensation. The standard rate of contributions under State laws is generally 2.7 percent. Federal law requires that State tax collections be deposited promptly to the State's account in the Unemployment Trust Fund in the Federal Treasury. The Treasury invests the funds, and credits each State with its share of the interest. A State draws from its fund as necessary for the payment of benefits. Congress appropriates annually from the administration account the funds necessary for Federal and State administration.

From 1939 until December 31, 1971, the Federal taxable wage base was the first $3,000 of each employee's wages; 23 States had adopted higher bases than that. Effective January 1, 1972, the Federal wage was changed to $4,200 and all States now have bases at least that high. Federal law allows the States to vary an employer's rate from the standard rate, and still have the employer receive the full 2.7 percent offset against his Federal tax. The variations must be on the basis of the individual employer's experience with unemployment or a factor related to the total risk of unemployment. As a result of experience rating, the average State tax rate for calendar year 1974 is estimated at 2 percent of taxable wages (equal to 1 percent of total wages). By State, the average rate varied from 0.3 percent of taxable wages to 3.7 percent of taxable wages.

There are several different systems for rate determinations, which vary in the factors used to measure experience, in the number of years of experience included in the measurement, and in the formulas used to translate experience into a tax rate.

Unemployment compensation for Federal civilian employees (UCFE).— States administer the program according to their own laws and program rules, with certain exceptions, as agents for the Federal Government, and are reimbursed from appropriations from Federal general revenues for the full cost of the program.

Unemployment compensation for ex-servicemen (UCX).-States administer the program according to their own laws and program rules, with certain exceptions, as agents for the Federal Government, and are reimbursed from appropriations from Federal general revenues for the full cost of the program.

Federal-State extended unemployment compensation program.-The 1970 Federal amendments required each State to establish a program for extending the duration of benefits during periods when the insured unemployment rate in the State, or in the Nation, reached prescribed levels. Half the cost of such benefits is paid by the States from the State contributions and half is paid by the Federal government from the Federal unemployment tax revenues.

Extended benefits payable solely because of lowering the national trigger temporarily to 4 percent are financed entirely by the Federal Government (see extended unemployment compensation below).