House Report 106-777, Part 1 - 106th Congress (1999-2000)
July 20, 2000, As Reported by the Transportation and Infrastructure Committee

Report text available as:

Formatting necessary for an accurate reading of this legislative text may be shown by tags (e.g., <DELETED> or <BOLD>) or may be missing from this TXT display. For complete and accurate display of this text, see the PDF.




House Report 106-777 - RAILROAD RETIREMENT AND SURVIVORS' IMPROVEMENT ACT OF 2000




[House Report 106-777]
[From the U.S. Government Printing Office]



106th Congress                                            Rept. 106-777
                        HOUSE OF REPRESENTATIVES
 2d Session                                                      Part 1

======================================================================



 
       RAILROAD RETIREMENT AND SURVIVORS' IMPROVEMENT ACT OF 2000

                                _______
                                

                 July 20, 2000.--Ordered to be printed

                                _______
                                

 Mr. Shuster, from the Committee on Transportation and Infrastructure, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 4844]

  The Committee on Transportation and Infrastructure, to whom 
was referred the bill (H.R. 4844) to modernize the financing of 
the railroad retirement system and to provide enhanced benefits 
to employees and beneficiaries, having considered the same, 
report favorably thereon with an amendment and recommend that 
the bill as amended do pass.
  The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

  (a) Short Title.--This Act may be cited as the ``Railroad Retirement 
and Survivors' Improvement Act of 2000''.
  (b) Table of Contents.--

Sec. 1. Short title; table of contents.

         TITLE I--AMENDMENTS TO RAILROAD RETIREMENT ACT OF 1974

Sec. 101. Expansion of widow's and widower's benefits.
Sec. 102. Retirement age restoration.
Sec. 103. Vesting requirement.
Sec. 104. Repeal of railroad retirement maximum.
Sec. 105. Investment of railroad retirement assets.
Sec. 106. Elimination of supplemental annuity account.
Sec. 107. Transfer authority revisions.
Sec. 108. Annual ratio projections and certifications by the Railroad 
Retirement Board.

       TITLE II--AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986

Sec. 201. Amendments to the Internal Revenue Code of 1986.
Sec. 202. Exemption from tax for Railroad Retirement Investment Trust.
Sec. 203. Repeal of supplemental annuity tax.
Sec. 204. Employer, employee representative, and employee tier 2 tax 
rate adjustments.

         TITLE I--AMENDMENTS TO RAILROAD RETIREMENT ACT OF 1974

SEC. 101. EXPANSION OF WIDOW'S AND WIDOWER'S BENEFITS.

  (a) In General.--Section 4(g) of the Railroad Retirement Act of 1974 
is amended by adding at the end the following new subdivision:
  ``(10)(i) If for any month the unreduced annuity provided under this 
section for a widow or widower is less than the widow's or widower's 
initial minimum amount computed pursuant to paragraph (ii) of this 
subdivision, the unreduced annuity shall be increased to that initial 
minimum amount. For the purposes of this subdivision, the unreduced 
annuity is the annuity without regard to any deduction on account of 
work, without regard to any reduction for entitlement to an annuity 
under section 2(a)(1) of this Act, without regard to any reduction for 
entitlement to a benefit under title II of the Social Security Act, and 
without regard to any reduction for entitlement to a public service 
pension pursuant to sections 202(e)(7), 202(f)(2), or section 202(g)(4) 
of the Social Security Act.
  ``(ii) For the purposes of this subdivision, the widow or widower's 
initial minimum amount is the amount of the unreduced annuity computed 
at the time an annuity is awarded to that widow or widower, except 
that--
          ``(A) in subsection (g)(1)(i) `100 per centum' shall be 
        substituted for `50 per centum'; and
          ``(B) in subsection (g)(2)(ii) `130 per centum' shall be 
        substituted for `80 per centum' both places it appears.
  ``(iii) If a widow or widower who was previously entitled to a 
widow's or widower's annuity under section 2(d)(1)(ii) of this Act 
becomes entitled to a widow's or widower's annuity under section 
2(d)(1)(i) of this Act, a new initial minimum amount shall be computed 
at the time of award of the widow's or widower's annuity under section 
2(d)(1)(i) of this Act.''.
  (b) Effective Date.--
          (1) Generally.--The amendment made by this section shall take 
        effect January 1, 2001 and shall apply to annuity amounts 
        accruing for months after December 2000 in the case of 
        annuities awarded on or after that date and in the case of 
        annuities awarded before that date if the annuity amount under 
        section 4(g) of the Railroad Retirement Act was computed under 
        section 4(g), as amended by Public Law 97-35.
          (2) Special rule for annuities awarded before january 1, 
        2001.--In applying the amendments made by this section to 
        annuities awarded before January 1, 2001, the calculation of 
        the initial minimum amount under new section 4(g)(10)(ii) of 
        the Act shall be made as of the date of award of the widow's or 
        widower's annuity.

SEC. 102. RETIREMENT AGE RESTORATION.

  (a) Employee Annuities.--Section 3(a)(2) of the Railroad Retirement 
Act of 1974 is amended by inserting after ``(2)'' the following: ``For 
purposes of this subsection, individuals entitled to an annuity under 
section 2(a)(1)(ii) of this Act shall, except for the purposes of 
recomputations in accordance with section 215(f) of the Social Security 
Act, be deemed to have attained retirement age (as defined by section 
216(l) of the Social Security Act).''.
  (b) Spouse and Survivor Annuities.--Section 4(a)(2) of the Railroad 
Retirement Act of 1974 is amended by striking ``if an'' and all that 
follows through ``section 2(c)(1) of this Act'' and inserting ``a 
spouse entitled to an annuity under section 2(c)(1)(ii)(B) of this 
Act''.
  (c) Conforming Repeals.--Sections 3(a)(3), 4(a)(3), and 4(a)(4) of 
the Railroad Retirement Act are repealed.
  (d) Effective Dates.--
          (1) Generally.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to annuities that 
        begin to accrue on or after January 1, 2001.
          (2) Exception.--The amount of the annuity provided for a 
        spouse under section 4(a) shall be computed under section 
        4(a)(3), as in effect before the date of the enactment of this 
        section, if the annuity amount provided under section3(a) for 
the individual on whose employment record the spouse annuity is based 
was computed under section 3(a)(3), as in effect before the date of the 
enactment of this section.

SEC. 103. VESTING REQUIREMENT.

  (a) Certain Annuities for Individuals.--Section 2(a) of the Railroad 
Retirement Act of 1974 is amended--
          (1) by inserting in subdivision (1) ``or, for purposes of 
        paragraphs (i), (iii), and (v), five years of service, all of 
        which accrues after December 31, 1995,'' after ``ten years of 
        service'', and
          (2) by adding at the end the following:
  ``(4) An individual who is entitled to an annuity under paragraph (v) 
of subdivision (1), but who does not have at least ten years of 
service, shall, prior to the month in which the individual attains age 
62, be entitled only to an annuity amount computed under section 3(a) 
of this Act (without regard to section 3(a)(2) of this Act) or section 
3(f)(3) of this Act. Upon attainment of age 62, such an individual may 
also be entitled to an annuity amount computed under section 3(b), but 
such annuity amount shall be reduced for early retirement in the same 
manner as if the individual were entitled to an annuity under section 
2(a)(1)(iii).''.
  (b) Computation Rule for Individuals' Annuities.--Section 3(a) of the 
Railroad Retirement Act of 1974, as amended by section 102 of this Act, 
is furtheramended by adding at the end the following new subdivision:
  ``(3) If an individual entitled to an annuity under section 
2(a)(1)(i) or (iii) of this Act on the basis of less than ten years of 
service is entitled to a benefit under section 202(a), section 202(b), 
or section 202(c) of the Social Security Act which began to accrue 
before the annuity under section 2(a)(1)(i) or (iii) of this Act, the 
annuity amount provided such individual under this subsection, shall be 
computed as though the annuity under this Act began to accrue on the 
later of (A) the date on which the benefit under section 202(a), 
section 202(b), or section 202(c) of the Social Security Act began or 
(B) the date on which the individual first met the conditions for 
entitlement to an age reduced annuity under this Act other than the 
conditions set forth in sections 2(e)(1) and 2(e)(2) of this Act and 
the requirement that an application be filed.''.
  (c) Survivors' Annuities.--Section 2(d)(1) of the Railroad Retirement 
Act of 1974 is amended by inserting ``or five years of service, all of 
which accrues after December 31, 1995,'' after ``ten years of 
service''.
  (d) Limitation on Annuity Amounts.--Section 2 of the Railroad 
Retirement Act of 1974 is amended by adding at the end the following:
  ``(i) An individual entitled to an annuity under this section who has 
completed five years of service, all of which accrues after 1995, but 
who has not completed ten years of service, and the spouse, divorced 
spouse, and survivors of such individual, shall not be entitled to an 
annuity amount provided under section 3(a), section 4(a), or section 
4(f) of this Act unless the individual, or the individual's spouse, 
divorced spouse, or survivors, would be entitled to a benefit under the 
Social Security Act on the basis of the individual's employment record 
under both the Railroad Retirement Act and the Social Security Act.''.
  (e) Computation Rule for Spouses' Annuities.--Section 4(a) of the 
Railroad Retirement Act of 1974, as amended by section 102 of this Act, 
is further amended by adding at the end the following new subdivision:
  ``(3) If a spouse entitled to an annuity under section 
2(c)(1)(ii)(A), section 2(c)(1)(ii)(C), or section 2(c)(2) of this Act 
or a divorced spouse entitled to an annuity under section 2(c)(4) of 
this Act on the basis of the employment record of an employee who will 
have completed less than 10 years of service is entitled to a benefit 
under section 202(a), section 202(b), or section 202(c) of the Social 
Security Act which began to accrue before the annuity under section 
2(c)(1)(ii)(A), section 2(c)(1)(ii)(C), section 2(c)(2), or section 
2(c)(4) of this Act, the annuity amount provided under this subsection 
shall be computed as though the annuity under this Act began to accrue 
on the later of (A) the date on which the benefit under section 202(a), 
section 202(b), or section 202(c) of the Social Security Act began or 
(B) the first date on which the annuitant met the conditions for 
entitlement to an age reduced annuity under this Act other than the 
conditions set forth in sections 2(e)(1) and 2(e)(2) of this Act and 
the requirement that an application be filed.''.
  (f)  Application Deeming Provision.--Section 5(b) of the Railroad 
Retirement Act of 1974 is amended by striking the second sentence and 
inserting the following: ``An application filed with the Board for an 
employee annuity, spouse annuity, or divorced spouse annuity on the 
basis of the employment record of an employee who will have completed 
less than ten years of service shall be deemed to be an application for 
any benefit to which such applicant may be entitled under this Act or 
section 202(a), section 202(b), or section 202(c) of the Social 
Security Act. An application filed with the Board for an annuity on the 
basis of the employment record of an employee who will have completed 
ten years of service shall, unless the applicant specified otherwise, 
be deemed to be an application for any benefit to which such applicant 
may be entitled under this Act or title II of the Social Security 
Act.''.
  (g) Crediting Service Under the Social Security Act.--Section 18(2) 
of the Railroad Retirement Act of 1974 is amended--
          (1) by inserting ``or less than five years of service, all of 
        which accrues after December 31, 1995,'' after ``ten years of 
        service'' every place it occurs; and
          (2) by inserting ``or five or more years of service, all of 
        which accrues after December 31, 1995,'' after ``ten or more 
        years of service''.
  (h) Automatic Benefit Eligibility Adjustments.--Section 19 of the 
Railroad Retirement Act of 1974 is amended--
          (1) by inserting ``or five or more years of service, all of 
        which accrues after December 31, 1995,'' after ``ten years of 
        service'' in subsection (c); and
          (2) by inserting ``or five or more years of service, all of 
        which accrues after December 31, 1995,'' after ``ten years of 
        service'' in subsection (d)(2).
  (i) Conforming Amendments.--
          (1) Section 6(e)(1) of the Railroad Retirement Act of 1974 is 
        amended by inserting ``or five or more years of service, all of 
        which accrues after December 31, 1995,'' after ``ten years of 
        service''.
          (2) Section 7(b)(2) of the Railroad Retirement Act of 1974 is 
        amended by inserting ``or five or more years of service, all of 
        which accrues after December 31, 1995,'' after ``ten years of 
        service''.
          (3) Section 205(i) of the Social Security Act is amended by 
        inserting ``or five or more years of service, all of which 
        accrues after December 31, 1995,'' after ``ten years of 
        service''.
  (j) Effective Date.--The amendments made by this section shall take 
effect January 1, 2001.

SEC. 104. REPEAL OF RAILROAD RETIREMENT MAXIMUM.

  (a) Employee Annuities.--Section 3(f) of the Railroad Retirement Act 
of 1974 is amended by striking paragraph (1).
  (b) Spouse and Survivor Annuities.--Section 4 of the Railroad 
Retirement Act of 1974 is amended by striking subsection (c).
  (c) Effective Date.--The amendments made by this section shall be 
effective January 1, 2001, and shall apply to annuity amounts accruing 
for months after December 2000.

SEC. 105. INVESTMENT OF RAILROAD RETIREMENT ASSETS.

  (a) Establishment of Railroad Retirement Investment Trust.--Section 
15 of the Railroad Retirement Act of 1974 is amended by inserting after 
subsection (i) the following:
  ``(j) Railroad Retirement Investment Trust.--
          ``(1) Establishment.--The Railroad Retirement Investment 
        Trust (hereinafter in this subsection referred to as the 
        `Trust') is hereby established. The Trust shall manage and 
        invest the assets of the Railroad Retirement Trust Fund 
        (hereinafter in this section referred to as the ``Fund'', which 
        is hereby established as a trust organized in the District of 
        Columbia and shall, to the extent not inconsistent with this 
        Act, be subject to the laws of the District of Columbia 
        applicable to such trusts.
          ``(2) Not a federal agency or instrumentality.--The Trust is 
        not a department, agency, or instrumentality of the Government 
        of the United States and shall not be subject to title 31, 
        United States Code.
          ``(3) Board of trustees.--
                  ``(A) Generally.--The Trust shall have a Board of 
                Trustees, consisting of 7 members, each appointed by a 
                unanimous vote of the Railroad Retirement Board. The 
                Railroad Retirement Board may remove any member so 
                appointed by unanimous vote. Of the 7 members, 3 shall 
                represent the interests of labor, 3 shall represent the 
                interests of management, and 1 shall represent the 
                interests of the general public. The members of the 
                Board of Trustees shall not be considered officers or 
                employees of the Government of the United States.
                  ``(B) Qualifications.--Members of the Board of 
                Trustees shall be appointed only from among persons who 
                have experience and expertise in the management of 
                financial investments and pension plans. No member of 
                the Railroad Retirement Board shall be eligible to be a 
                member of the Board of Trustees.
                  ``(C) Terms.--Except as provided in this 
                subparagraph, each member shall be appointed for a 3-
                year term. The initial members appointed under this 
                paragraph shall be divided into 3 equal groups so 
                nearly as may be, of which one group will be appointed 
                for a 1-year term, one for a 2-year term, and one for a 
                3-year term. A vacancy in the Board of Trustees shall 
                not affect the powers of the Board of Trustees and 
                shall be filled in the same manner as the selection of 
                the member whose departure caused the vacancy. Upon the 
                expiration of a term of a member of the Board of 
                Trustees, that member shall continue to serve until a 
                successor is appointed.
          ``(4) Powers of the board of trustees.--The Board of Trustees 
        shall--
                  ``(A) retain independent advisers to assist it in the 
                formulation and adoption of its investment guidelines;
                  ``(B) retain independent investment managers to 
                invest the assets of the Fund in a manner consistent 
                with such investment guidelines;
                  ``(C) invest assets in the Fund, pursuant to the 
                policies adopted in subparagraph (A);
                  ``(D) pay administrative expenses of the Fund and the 
                Trust from the money in the Fund; and
                  ``(E) transfer money to the disbursing agent to pay 
                benefits payable under this Act from money in the Fund 
                and administrative expenses related to those benefits.
          ``(5) Reporting requirements and fiduciary standards.--The 
        following reporting requirements and fiduciary standards shall 
        apply with respect to the Railroad Retirement Trust and the 
        Railroad Retirement Trust Fund (and the assets held in such 
        Trust Fund):
                  ``(A) Duties of the board of trustees.--The Railroad 
                Retirement Trust and each member of the Board of 
                Trustees shall discharge their duties with respect to 
                the assets of the Fund solely in the interest of the 
                Railroad Retirement Board and through it, the 
                participants and beneficiaries of the programs funded 
                under this Act--
                          ``(i) for the exclusive purpose of--
                                  ``(I) providing benefits to 
                                participants and their beneficiaries; 
                                and
                                  ``(II) defraying reasonable expenses 
                                of administering the functions of the 
                                Trust;
                          ``(ii) with the care, skill, prudence, and 
                        diligence under the circumstances then 
                        prevailing that a prudent person acting in a 
                        like capacity and familiar with such matters 
                        would use in the conduct of an enterprise of a 
                        like character and with like aims;
                          ``(iii) by diversifying investments so as to 
                        minimize the risk of large losses, unless under 
                        the circumstances it is clearly prudent not to 
                        do so; and
                          ``(iv) in accordance with Trust governing 
                        documents and instruments insofar as such 
                        documents and instruments are consistent with 
                        this Act.
                  ``(B) Prohibitions with respect to members of the 
                board of trustees.--No member of the Board of Trustees 
                shall--
                          ``(i) deal with the assets of the Fund in the 
                        trustee's own interest or for the trustee's own 
                        account;
                          ``(ii) in an individual or in any other 
                        capacity act in any transaction involving the 
                        assets of the Fund on behalf of a party (or 
                        represent a party) whose interests are adverse 
                        to the interests of the Trust, the Fund, the 
                        Railroad Retirement Board, or the interests of 
                        participants or beneficiaries; or
                          ``(iii) receive any consideration for the 
                        trustee's own personal account from any party 
                        dealing with the assets of the Fund.
                  ``(C) Exculpatory provisions and insurance.--Any 
                provision in an agreement or instrument that purports 
                to relieve a trustee from responsibility or liability 
                for any responsibility, obligation or duty under this 
                Act shall be void: Provided, however, That nothing 
                shall preclude--
                          ``(i) the Trust from purchasing insurance for 
                        its trustees or for itself to cover liability 
                        or losses occurring by reason of the act or 
                        omission of a trustee, if such insurance 
                        permits recourse by the insurer against the 
                        trustee in the case of a breach of a fiduciary 
                        obligation by such trustee;
                          ``(ii) a trustee from purchasing insurance to 
                        cover liability under this section from and for 
                        his own account; or
                          ``(iii) an employer or an employee 
                        organization from purchasing insurance to cover 
                        potential liability of one or more trustees 
                        with respect to their fiduciary 
                        responsibilities, obligations, and duties under 
                        this section.
                  ``(D) Bonding.--Every trustee and every person who 
                handles funds or other property of the Fund (hereafter 
                in this subsection referredto as `Trust official') 
shall be bonded in accordance with the following:
                          ``(i) The amount of such bond shall be fixed 
                        at the beginning of each fiscal year of the 
                        Trust by the Railroad Retirement Board. Such 
                        amount shall not be less than 10 percent of the 
                        amount of the funds handled. In no case shall 
                        such bond be less than $1,000 nor more than 
                        $500,000, except that the Railroad Retirement 
                        Board, after consideration of the record, may 
                        prescribe an amount in excess of $500,000, 
                        subject to the 10 per centum limitation of the 
                        preceding sentence.
                          ``(ii) It shall be unlawful for any Trust 
                        official to receive, handle, disburse, or 
                        otherwise exercise custody or control of any of 
                        the funds or other property of the Fund without 
                        being bonded as required by this subsection and 
                        it shall be unlawful for any Trust official, or 
                        any other person having authority to direct the 
                        performance of such functions, to permit such 
                        functions, or any of them, to be performed by 
                        any Trust official, with respect to whom the 
                        requirements this subsection have not been met.
                          ``(iii) It shall be unlawful for any person 
                        to procure any bond required by this subsection 
                        from any surety or other company or through any 
                        agent or broker in whose business operations 
                        such person has any control or significant 
                        financial interest, direct or indirect.
                  ``(E) Audit and report.--
                          ``(i) The Trust shall annually engage an 
                        independent qualified public accountant to 
                        audit the financial statements of the Fund.
                          ``(ii) The Trust shall submit an annual 
                        management report to the Congress not later 
                        than 180 days after the end of the Trust's 
                        fiscal year. A management report under this 
                        subsection shall include--
                                  ``(I) a statement of financial 
                                position;
                                  ``(II) a statement of operations;
                                  ``(III) a statement of cash flows;
                                  ``(IV) a statement on internal 
                                accounting and administrative control 
                                systems;
                                  ``(V) the report resulting from an 
                                audit of the financial statements of 
                                the Trust conducted under subparagraph 
                                (E)(i); and
                                  ``(VI) any other comments and 
                                information necessary to inform the 
                                Congress about the operations and 
                                financial condition of the Trust and 
                                the Fund.
                          ``(iii) The Trust shall provide the 
                        President, the Railroad Retirement Board, and 
                        the Director of the Office of Management and 
                        Budget a copy of the management report when it 
                        is submitted to Congress.
                  ``(F) Enforcement.--The Railroad Retirement Board may 
                bring a civil action--
                          ``(i) to enjoin any act or practice by the 
                        Railroad Retirement Investment Trust, its Board 
                        of Trustees or its employees or agents that 
                        violates any provision of this Act; or
                          ``(ii) to obtain other appropriate relief to 
                        redress such violations, or to enforce any 
                        provisions of this Act.
          ``(6) Rules and administrative powers.--The Board of Trustees 
        shall have the authority to make rules to govern its 
        operations, employ professional staff, and contract with 
        outside advisers to provide legal, accounting, investment 
        advisory or other services necessary for the proper 
        administration of this subsection. In the case of contracts 
        with investment advisory services, compensation for such 
        services may be on a fixed contract fee basis or on such other 
        terms and conditions as are customary for such services.
          ``(7) Quorum.--Five members of the Board of Trustees 
        constitute a quorum to do business. Investment guidelines must 
        be adopted by a unanimous vote of the entire Board of Trustees. 
        All other decisions of the Board of Trustees shall be decided 
        by a majority vote of the quorum present. All decisions of the 
        Board of Trustees shall be entered upon the records of the 
        Board of Trustees.''.
  (b) Conforming and Technical Amendments Governing Investments.--
Subsection 15(e) of the Railroad Retirement Act of 1974 is amended--
          (1) beginning in the first sentence, by striking ``, the Dual 
        Benefits Payments Account'' and all that follows through ``may 
        be made only'' in the second sentence and inserting ``and the 
        Dual Benefits Payments Account as are not transferred to the 
        Railroad Retirement Investment Trust as the Board may 
        determine'';
          (2) by striking ``the Second Liberty Bond Act, as amended'' 
        and inserting ``chapter 31 of title 31''; and
          (3) by striking ``the foregoing requirements'' and inserting 
        ``the requirements of this subsection''.
  (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this section.

SEC. 106. ELIMINATION OF SUPPLEMENTAL ANNUITY ACCOUNT.

  (a) Source of Payments.--Section 7(c)(1) of the Railroad Retirement 
Act of 1974 is amended by striking ``payments of supplemental annuities 
under section 2(b) of this Act shall be made from the Railroad 
Retirement Supplemental Account, and''.
  (b) Elimination of Account.--Section 15(c) of the Railroad Retirement 
Act of 1974 is repealed.
  (c) In General.--Section 15(a) of the Railroad Retirement Act of 1974 
is amended by striking ``, except those portions of the amounts covered 
into the Treasury under sections 3211(b),'' and all that follows 
through the end of the subsection and inserting a period.
  (d) Effective Date.--The amendments made by this section shall take 
effect January 1, 2001, except that the Railroad Retirement 
Supplemental Account shall continue to exist until the transfer 
authorized by the following sentence occurs. As soon as possible after 
December 31, 2000, the Board shall determine the balance in the 
Railroad Retirement Supplemental Account and shall direct the Secretary 
of the Treasury to transfer such amount to the Railroad Retirement 
Trust Fund and the Secretary shall make such transfer.

SEC. 107. TRANSFER AUTHORITY REVISIONS.

  (a) Railroad Retirement Account.--Section 15 of the Railroad 
Retirement Act of 1974 is amended by adding after subsection (j) the 
following:
  ``(k) Transfers to the Fund.--The Board shall, upon establishment of 
the Railroad Retirement Trust Fund and from time to time thereafter, 
direct the Secretary of the Treasury to transfer, in such manner as 
will maximize the investment returns to the Railroad Retirement system, 
that portion of the Railroad Retirement Account that is not needed to 
pay current administrative expenses of the Board to the Railroad 
Retirement Trust Fund. The Secretary shall make that transfer.''.
  (b) Railroad Retirement Trust Fund.--Section 15 of the Railroad 
Retirement Act of 1974, as amended by subsection (a), is further 
amended by adding after subsection (k) the following:
  ``(l) Railroad Retirement Trust Fund.--The Railroad Retirement Trust 
shall from time to time transfer to the disbursing agent described in 
section 7(b)(4) such amounts as may be necessary to pay benefits under 
this Act (other than benefits paid from the Social Security Equivalent 
Benefit Account or the Dual Benefit Payments Account).''.
  (c) Social Security Equivalent Benefit Account.--Section 15A(d)(2) of 
the Railroad Retirement Act of 1974 is amended to read as follows:
  ``(2) Upon establishment of the Railroad Retirement Trust Fund and 
from time to time thereafter, the Board shall direct the Secretary of 
the Treasury to transfer, in such manner as will maximize the 
investment returns to the Railroad Retirement system, the balance of 
the Social Security Equivalent Benefit Account not needed to pay 
current benefits required to be paid from that Account to the Railroad 
Retirement Trust Fund, and the Secretary shall make that transfer. Any 
balance transferred under this paragraph shall be used by the Railroad 
Retirement Trust only to pay benefits under this Act or to purchase 
obligations of the United States that are backed by the full faith and 
credit of the United States pursuant to chapter 31 of title 31, United 
States Code. The proceeds of sales of, and the interest income from, 
such obligations shall be used by the Trust only to pay benefits under 
this Act.''.
          (2) Transfers to disbursing agent.--Section 15A(c)(1) of the 
        Railroad Retirement Act of 1974 is amended by adding at the end 
        the following: ``The Secretary shall from time to time transfer 
        to the disbursing agent under section 7(b)(4) amounts necessary 
        to pay those benefits.''.
          (3) Conforming amendment.--Section 15A(d)(1) of the Railroad 
        Retirement Act of 1974 is amended by striking the second and 
        third sentences.
  (d) Dual Benefits Payments Account.--Section 15(d)(1) of the Railroad 
Retirement Act of 1974 is amended by adding at the end the following: 
``The Secretary of the Treasury shall from time to time transfer from 
the Dual Benefits Payments Account to the disbursing agent under 
section 7(b)(4) amounts necessary to pay benefits payable from that 
Account.''.
  (e) Certification by the Board and Payment.--Paragraph (4) of section 
7(b) of the Railroad Retirement Act of 1974 is amended to read as 
follows:
  ``(4)(A) The Railroad Retirement Board, after consultation with the 
Board of Trustees of the Railroad Retirement Trust and the Secretary of 
the Treasury, shall enter into an arrangement with a nongovernmental 
financial institution to serve as disbursing agent for benefits payable 
under this Act who shall disburse consolidated benefits under this Act 
to each recipient.
  ``(B) The Board shall from time to time certify--
          ``(i) to the Secretary of the Treasury the amounts required 
        to be transferred from the Social Security Equivalent Benefit 
        Account and the the Dual Benefits Payments Account to the 
        disbursing agent to make payments of benefits and the Secretary 
        of the Treasury shall transfer those amounts;
          ``(ii) to the Board of Trustees of the Railroad Retirement 
        Investment Trust the amounts required to be transferred from 
        the Railroad Retirement Investment Trust to the disbursing 
        agent to make payments of benefits and the Board of Trustees 
        shall transfer those amounts; and
          ``(iii) to the disbursing agent the name and address of each 
        individual entitled to receive a payment, the amount of such 
        payment, and the time at which the payment should be made.''.
  (f) Benefit Payments.--Section 7(c)(1) of the Railroad Retirement Act 
of 1974 is amended--
          (1) by striking ``from the Railroad Retirement Account'' and 
        inserting ``by the disbursing agent under subsection (b)(4) 
        from money transferred to it from the Railroad Retirement Trust 
        Fund or the Social Security Equivalent Benefit Account, as the 
        case may be''; and
          (2) by inserting ``by the disbursing agent under subsection 
        (b)(4) from money transferred to it'' after ``Public Law 93-445 
        shall be made''.
  (g) Transitional Rule for Existing Obligation.--In making transfers 
under subsections (a) and (c), the Board shall consult with the 
Secretary of the Treasury to design an appropriate method to transfer 
obligations held as of the date of enactment or to convert such 
obligations to cash prior to transfer. The Railroad Retirement Trust 
may hold to maturity any obligations so received or may redeem them 
prior to maturity, as the Trust deems appropriate.

SEC. 108. ANNUAL RATIO PROJECTIONS AND CERTIFICATIONS BY THE RAILROAD 
                    RETIREMENT BOARD.

  (a) Projections.--Section 22(a)(1) of the Railroad Retirement Act of 
1974 is amended--
          (1) by adding the following sentence after the first 
        sentence: ``On or before May 1 of each year beginning in 2002, 
        the Railroad Retirement Board shall compute its projection of 
        the account benefits ratio and the average account benefits 
        ratio (as defined by section 3241(c) of the Internal Revenue 
        Code of 1986) for each of the next succeeding five fiscal 
        years.''; and
          (2) by striking ``the projection prepared pursuant to the 
        preceding sentence'' and inserting ``the projections prepared 
        pursuant to the preceding two sentences''.
  (b) Certifications.--The Railroad Retirement Act of 1974 is amended 
by adding at the end the following:
       ``computation and certification of account benefit ratios
  ``Sec. 23. (a) On or before November 1, 2002, the Railroad Retirement 
Board shall--
          ``(1) compute the account benefits ratios for each of the 
        most recent 10 preceding fiscal years, and
          ``(2) certify the account benefits ratios for each such 
        fiscal year to the Secretary.
  ``(b) On or before November 1 of each year after 2002, the Railroad 
Retirement Board shall--
          ``(1) compute the account benefits ratio for the fiscal year 
        ending in such year, and
          ``(2) certify the account benefits ratio for such fiscal year 
        to the Secretary.
  ``(c) Definition.--As used in this section, the term `account benefit 
ratio' has the meaning given that term in section 3241(c) of the 
Internal Revenue Code of 1986.''.

       TITLE II--AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986

SEC. 201. AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986.

  Except as otherwise provided, whenever in this title an amendment or 
repeal is expressed in terms of an amendment to, or repeal of, a 
section or other provision, the reference shall be considered to be 
made to a section or other provision of the Internal Revenue Code of 
1986.

SEC. 202. EXEMPTION FROM TAX FOR RAILROAD RETIREMENT INVESTMENT TRUST.

  Subsection (c) of section 501 is amended by adding at the end the 
following new paragraph:
          ``(28) The Railroad Retirement Investment Trust established 
        under section 15(j) of the Railroad Retirement Act of 1974.''

SEC. 203. REPEAL OF SUPPLEMENTAL ANNUITY TAX.

  (a) Repeal of Tax on Employee Representatives.--Section 3211 is 
amended by striking subsection (b).
  (b) Repeal of Tax on Employers.--Section 3221 is amended by striking 
subsections (c) and (d).
  (c) Effective Date.--The amendments made by this section shall apply 
to calendar years beginning after December 31, 2000.

SEC. 204. EMPLOYER, EMPLOYEE REPRESENTATIVE, AND EMPLOYEE TIER 2 TAX 
                    RATE ADJUSTMENTS.

  (a) Rate of Tax on Employers.--Subsection (b) of section 3221 is 
amended to read as follows:
  ``(b) Tier 2 Tax.--
          ``(1) In general.--In addition to other taxes, there is 
        hereby imposed on every employer an excise tax, with respect to 
        having individuals in his employ, equal to the applicable 
        percentage of the compensation paid during any calendar year by 
        such employer for services rendered to such employer.
          ``(2) Applicable percentage.--For purposes of paragraph (1), 
        the term `applicable percentage' means--
                  ``(A) 15.6 percent in the case of compensation paid 
                during 2001,
                  ``(B) 14.2 percent in the case of compensation paid 
                during 2002, and
                  ``(C) in the case of compensation paid during any 
                calendar year after 2002, the percentage determined 
                under section 3241 for such calendar year.''.
  (b) Rate of Tax on Employee Representatives.--Section 3211, as 
amended by section 203, is amended by striking subsection (a) and 
inserting the following new subsections:
  ``(a) Tier 1 Tax.--In addition to other taxes, there is hereby 
imposed on the income of each employee representative a tax equal to 
the applicable percentage of the compensation received during any 
calendar year by such employee representative for services rendered by 
such employee representative. For purposes of the preceding sentence, 
the term `applicable percentage' means the percentage equal to the sum 
of the rates of tax in effect under subsections (a) and (b) of section 
3101 and subsections (a) and (b) of section 3111 for the calendar year.
  ``(b) Tier 2 Tax.--
          ``(1) In general.--In addition to other taxes, there is 
        hereby imposed on the income of each employee representative a 
        tax equal to the applicable percentage of the compensation 
        received during any calendar year by such employee 
        representatives for services rendered by such employee 
        representative.
          ``(2) Applicable percentage.--For purposes of paragraph (1), 
        the term `applicable percentage' means--
                  ``(A) 14.75 percent in the case of compensation 
                received during 2001,
                  ``(B) 14.20 percent in the case of compensation 
                received during 2002, and
                  ``(C) in the case of compensation received during any 
                calendar year after 2002, the percentage determined 
                under section 3241 for such calendar year.
  ``(c) Cross Reference.--

                  ``For application of different contribution bases 
with respect to the taxes imposed by subsections (a) and (b), see 
section 3231(e)(2).''.

  (c) Rate of Tax on Employees.--Subsection (b) of section 3201 is 
amended to read as follows:
  ``(b) Tier 2 Tax.--
          ``(1) In general.--In addition to other taxes, there is 
        hereby imposed on the income of each employee a tax equal to 
        the applicable percentage of the compensation received during 
        any calendar year by such employee for services rendered by 
        such employee.
          ``(2) Applicable percentage.--For purposes of paragraph (1), 
        the term `applicable percentage' means--
                  ``(A) 4.90 percent in the case of compensation 
                received during 2001 or 2002, and
                  ``(B) in the case of compensation received during any 
                calendar year after 2002, the percentage determined 
                under section 3241 for such calendar year.''.
  (d) Determination of Rate.--Chapter 22 is amended by adding at the 
end thereof the following new subchapter:

             ``Subchapter E--Tier 2 Tax Rate Determination

                              ``Sec. 3241. Determination of tier 2 tax 
                                        rate based on average account 
                                        benefits ratio.

``SEC. 3241. DETERMINATION OF TIER 2 TAX RATE BASED ON AVERAGE ACCOUNT 
                    BENEFITS RATIO.

  ``(a) In General.--For purposes of sections 3201(b), 3211(b), and 
3221(b), the applicable percentage for any calendar year is the 
percentage determined in accordance with the table in subsection (b).
  ``(b) Tax Rate Schedule.--


------------------------------------------------------------------------
  Average account benefits ratio        Applicable
-----------------------------------   percentage for       Applicable
                                     sections 3211(b)    percentage for
    At least        But less than      and 3221(b)      section 3201(b)
------------------------------------------------------------------------
                            2.5                22.1                4.9
          2.5               3.0                18.1                4.9
          3.0               3.5                15.1                4.9
          3.5               4.0                14.1                4.9
          4.0               6.1                13.1                4.9
          6.1               6.5                12.6                4.4
          6.5               7.0                12.1                3.9
          7.0               7.5                11.6                3.4
          7.5               8.0                11.1                2.9
          8.0               8.5                10.1                1.9
          8.5               9.0                 9.1                0.9
          9.0                                   8.2                  0
------------------------------------------------------------------------


  ``(c) Definitions Related to Determination of Rates of Tax.--
          ``(1) Average account benefits ratio.--For purposes of this 
        section, the term `average account benefits ratio' means, with 
        respect to any calendar year, the average determined by the 
        Secretary of the account benefits ratios for the 10 most recent 
        fiscal years ending before such calendar year. If the amount 
        determined under the preceding sentence is not a multiple of 
        0.1, such amount shall be increased to the next highest 
        multiple of 0.1.
          ``(2) Account benefits ratio.--For purposes of this section, 
        the term `account benefits ratio' means, with respect to any 
        fiscal year, the amount determined by the Railroad Retirement 
        Board by dividing the fair market value of the assets in the 
        Railroad Retirement Account and of the Railroad Retirement 
        Investment Trust as of the close of such fiscal year by the 
        total benefits and administrative expenses paid from the 
        Railroad Retirement Account and the Railroad Retirement 
        Investment Trust during such fiscal year.
  ``(d) Notice.--No later than December 1 of each calendar year, the 
Secretary shall publish a notice in the Federal Register of the rates 
of tax determined under this section which are applicable for the 
following calendar year.''.
  (e) Conforming Amendments.--
          (1) Section 24(d)(3)(A)(iii) is amended by striking ``section 
        3211(a)(1)'' and inserting ``section 3211(a)''.
          (2) Section 72(r)(2)(B)(i) is amended by striking ``section 
        3211(a)(2)'' and inserting ``section 3211(b)''.
          (3) Paragraphs (2)(A)(iii)(II) and (4)(A) of section 3231(e) 
        is amended by striking ``3211(a)(1)'' and inserting 
        ``3211(a)''.
          (4) Section 3231(e)(2)(B)(ii)(I) is amended by striking 
        ``3211(a)(2)'' and inserting ``3211(b)''.
          (5) The table of subchapters for chapter 22 is amended by 
        adding at the end the following new item:

                              ``Subchapter E. Tier 2 tax rate 
                                        determination.''.

  (f) Effective Date.--The amendments made by this section shall apply 
to calendar years beginning after December 31, 2000.

                              Introduction

    The railroad retirement system was created separate from 
the Social Security program through a series of laws enacted in 
the 1930's, culminating in the Railroad Retirement and 
Carriers' Taxing Act of 1937. There was ample precedent for 
legislation taking into account the particular circumstances of 
the rail industry. Numerous laws pertaining to rail operations 
and safety, as well as the Railway Labor Act of 1926, had been 
enacted since the Interstate Commerce Act of 1887, and many 
more have been enacted since the 1930's.
    The need for a separate railroad retirement system arose 
from the inadequate financing of many of the railroads' 
preexisting private pension plans, and a desire for immediate 
benefit payments based on prior service. Social Security did 
not begin paying benefits until 1940 and did not credit service 
prior to 1937.
    Substantive changes to the Railroad Retirement and 
Carriers' Taxing Acts of 1937, including its replacement by the 
current Railroad Retirement Act of 1974, and substantive 
amendments to that latter Act have generally been enacted by 
the basis of joint recommendations negotiated by 
representatives of rail labor and management.
    The last major reform to railroad retirement occurred in 
1983 with enactment of the Railroad Retirement Solvency Act. 
This Act raised Tier II tax rates on both employers and 
employees, and for the first time subjected railroad retirement 
Tier II benefits to federal income tax. It also raised the age 
at which one can receive a full annuity from 60 with thirty 
years of service to 62 with thirty years of service.
    The railroad retirement system is administered by the 
Railroad Retirement Board, which is an independent agency in 
the executive branch of the United States Government. The Board 
has three members, each of whom is appointed by the President 
and confirmed by the Senate. The Railroad Retirement Act 
requires that one Board Member be appointed upon the 
recommendation of railroad labor and another Member appointed 
upon the recommendation of rail management. The Chair is 
appointed to represent the public at large.
    Annuities paid under the Railroad Retirement Act consist of 
different components called tiers. The Tier I benefit is based 
upon both the railroad and non-railroad earnings of the 
railroad employee, using social security formulas, and 
approximates what would be payable under the Social Security 
Act. Tier II benefits are based on an employee's railroad 
service only and are computed under benefit formulas in the 
Railroad Retirement Act. Tier II is the functional equivalent 
of a private industry-wide pension plan.
    In fiscal year 1999, the Railroad Retirement Board paid 
$8.2 billion in retirement and survivor benefits to 748,000 
beneficiaries. At the end of fiscal year 1999, there were 
316,358 railroad retirees, 167,478 spouses or divorced spouses 
of retirees, and 219,341 survivors receiving railroad 
retirement benefits.
    Payroll taxes on railroad employers and employees serve as 
the primary source of funding for railroad retirement benefits. 
Other sources include transfers under the financial interchange 
with the Social Security system; investment earnings from the 
trust funds; general revenue appropriations for vested dual 
benefits; income taxes on benefits and a work hour tax paid by 
railroad employers called the supplemental annuity tax.
    The changes made in H.R. 4844 apply only to the Tier II 
component of railroad retirement and are funded entirely by 
payroll taxes on railroad employers and employees and earnings 
from the investment of those taxes. Currently, railroads pay a 
16.1 per cent payroll tax and employees pay a 4.9 percent 
payroll tax for Tier II benefits. H.R. 4844 would not create or 
require any general fund subsidies to the railroad system.
    On September 17, 1998, the then-Subcommittee on Railroads 
held a hearing on H. Con. Res. 52, Modifying the Railroad 
Retirement Tier II Benefits for Widows and Widowers, which had 
been introduced by Congressman Jack Quinn (R-NY). H. Con. Res. 
52 was a concurrent resolution urging that the railroad 
industry, including rail labor, management and retiree 
organizations, open discussions for adequately funding an 
amendment to the Railroad Retirement Act of 1974 to modify the 
guaranteed minimum benefit for widows and widowers. Following 
the hearing, rail labor and management initiated discussions on 
a comprehensive reform of railroad retirement. H.R. 4844, 
cosponsored by the bipartisan leadership of the Transportation 
and Infrastructure Committee and the Ways and Means Committee, 
embodies the agreement between management and a majority of 
rail labor that was the result of those negotiations.

                          Summary of H.R. 4844


Changes to the tax structure

    Both Railroad Retirement benefits and payroll tax rates are 
fixed by current law. Thus, changes in the system require 
Congressional action. H.R. 4844 would make the Tier II tax 
rates more responsive to actual financing needs by the 
establishment of an automatic tax adjustment formula. Under 
this statutory formula, payroll taxes would be raised or 
lowered automatically, without further action by Congress, 
depending on the level of funds available to pay benefits. (A 
similar system of adjustable tax rates for railroad 
unemployment benefits was enacted in 1988.)
    Payroll taxes would be set each calendar year, pursuant to 
a statutory formula. In any calendar year for which the 10-year 
average balance ratio \1\ at the close of the previous fiscal 
year was no lower than 4.0 percent and no higher than 6.0 
percent, tax rates would be set at ``normal'' levels of 13.1 
percent for the employer and 4.9 percent for the employee. (The 
proposed reduction of the employer tax rate from the current 
16.1 percent to 13.1 percent is discussed below.) These 
``normal'' rates are projected to keep the average balance at 
or above a 4-year benefit reserve over the next 75 years, based 
on improving returns by an estimated 2 percentage points 
(discussed below). If the average fund balance ratio falls 
below 4.0 percent or exceeds 6.0 percent, the tax rates would 
vary in accordance with the statutory formula. The 4-year 
minimum benefits reserve requirement represents the highest 
level of reserves in the Railroad Retirement Account over the 
last 40 years. Key features of the operation of the tax 
adjustment mechanism include:
---------------------------------------------------------------------------
    \1\ This is the ratio of the fund balance to estimated annual 
benefit payments and administrative expenses.
---------------------------------------------------------------------------
    
 Allocation of Tax Rate Changes: Any increase in 
the payroll tax above the normal rates would be borne entirely 
by railroad employers. Any reduction in the rates below the 
normal rates would be divided equally between railroad 
employers and employees.
    
 Future Benefit Changes: If the average fund 
balance ratio exceeds 6.0 percent, employees may choose between 
a Tier II tax rate reduction specified in the statute, or a 
benefit increase of equal value. Benefit increases would be 
legislated by Congress, and management has agreed to support 
enactment of this legislation.
    
 Increase in Employee Tax Rate by Additional 
Benefit Equivalent: If any additional benefit is enacted as 
agreed above, the legislation would provide that the employee 
tax rate that otherwise would be effective under the statutory 
formula would be increased by the cost of the benefit.

Investment of assets

    Currently, investment of RRA assets is limited to U.S. 
government securities. Railroad Retirement Board projections 
for the RRA assume an annual return of 6 percent of 
investments. Between 1985 and 1998, the average annual return 
on RRA assets was unusually high at 9.12 per cent, but this 
still lagged far behind the average annual return in large 
multi-employer pension plans of 15.17 percent over the same 
period. Under H.R. 4844, authority would be provided for Tier 
II RRA assets to be invested in a new diversified investment 
portfolio, as are assets of private sector pension plans. A 
Railroad Retirement Investment Trust would be established to 
invest the assets of the RRA in a Trust Fund outside of 
Treasury. An independent Board of Trustees would be appointed 
to administer the Trust. The Trustees would be responsible for 
establishing investment guidelines for the prudent management 
of Tier II assets and for selecting outside investment advisors 
and managers to implement investment policies. There would be 7 
members of the Board of Trustees, all with investment 
experience and selected by a unanimous vote of the Railroad 
Retirement Board.
    In designing this investment proposal, it was assuming that 
investments by the Trust would result in an average annual 
return of 8 percent, i.e., 2 percentage points above current 
projections. Improving performance of the Trust portfolio by 
this amount permits the enhancement of employee benefits and 
the reduction of railroad employer tax rates, while maintaining 
at least an average benefit reserve of 4 years or more. Based 
on future projections about rates of returns, employment 
levels, and other variables, the employee tax rate could be 
reduced in the future.

Benefit improvements

    More effective management of Tier II assets would allow for 
the adoption of certain benefit improvements while protecting 
the long-term stability of the railroad retirement system. 
Payment of vested dual benefits and supplemental annuity 
benefits would continue as under current law. The bill would 
provide for the following benefit improvements.
    
 Expansion of Surviving Spouse Benefit. Surviving 
spouses would inherit the full Tier II annuity of the deceased 
retiree. Currently, the surviving spouse mayreceive no more 
than 50 percent of the retiree's annuity.
    
 Liberalized Early Retirement. Currently, an 
employee with 30 years of service is eligible to retire at age 
62 with no actuarial reduction in benefits. H.R. 4844 would 
allow for early retirement at age 60 with 30 years of service 
without a benefit reduction. As such, the bill would return the 
early retirement eligibility age to its pre-1983 level. The 
spouse of such an employee would also be eligible for an 
unreduced annuity at age 60.\2\
---------------------------------------------------------------------------
    \2\ Post-retirement Health Benefit. As part of the national 
collective bargaining agreement between labor and rail management, an 
early retirement health benefits plan is available for retirees at age 
61. Management and labor have agreed to re-negotiate the agreement to 
lower the eligibility age to 60 and to adjust the maximum lifetime 
benefit for medical inflation, if H.R. 4844 is enacted. This would 
conform eligibility for this private health benefit plan with 
eligibility for early retirement.
---------------------------------------------------------------------------
    
 Liberalized Vesting. The ten-year service 
requirement to vest for Tier I and Tier II annuities would be 
reduced to five years. Any employee with five years of post-
1995 service would be vested. This requirement would be 
consistent with private industry practices.
    
 Railroad Retirement Act Maximum. The limit on 
certain Tier II annuities awarded to an employee and an 
employee's spouse would be repealed.

Tax reductions

    Railroad employers currently pay 16.1 percent of taxable 
payroll into the Tier II account. Improved earnings from 
investing the Tier II assets would permit a phased reduction of 
employer taxes over the first three years following enactment 
of the proposal. The phase-in would occur as follows: 15.6 
percent in 2001; 14.2 percent in 2002; and 13.1 percent in 
2003. Employee tax rates would continue at the current 4.9 
percent, except as provided under the tax adjustment mechanism 
described above.
    In addition, the supplemental annuity tax (SAT) would be 
eliminated and supplemental annuity benefits would be paid 
directly from the Trust. (There would be no change in 
supplemental annuity benefits paid to eligible retirees.) The 
SAT is a cents-per-hour tax, currently set at 26.5 cents, paid 
only by employers. Benefits are available only to employees 
hired prior to October 1981.

Administration

    H.R. 4844 would continue the basic administrative structure 
of railroad retirement for Tier I, the railroad industry 
counterpart to Social Security. Tier II benefits would be paid 
from the Trust, which would be administered by a fiduciary, 
seven-member Board of Trustees. The Board is required to hire 
professional investment managers. Management of the Trust 
assets is subject to fiduciary standards similar to those under 
ERISA.

                               Conclusion

    H.R. 4844 is a landmark piece of legislation that provides 
benefits for all the participants in the railroad retirement 
system. It modernizes and strengthens the financing of the 
program while also providing for improved retirement benefits 
for railroad workers and their families.

                    Hearings and Legislative History

    No hearings were held by the Committee on H.R. 4844.

                        Committee Consideration

    On July 19, 2000, the Ground Transportation Subcommittee 
and the Full Committee met in open session and favorably 
reported H.R. 4844.

                             Rollcall Votes

    Clause 3(b) of rule XIII of the House of Representatives 
requires each committee report to include the total number of 
votes cast for and against on each rollcall vote on a motion to 
report and on any amendment offered to the measure or matter, 
and the names of those members voting for and against. There 
was one rollcall vote on final passage with 62 ayes and 1 nay. 
Following are the names of those members voting for and 
against.
        AYES                          NAY
Mr. Baird                           Mr. Taylor (MS)
Mr. Baldacci
Mr. Barcia
Mr. Bass
Mr. Bateman
Mr. Bereuter
Mr. Berkley
Mr. Blumenauer
Mr. Boehlert
Mr. Borski
Ms. Brown
Mr. Clement
Mr. Coble
Mr. Cook
Mr. Cooksey
Mr. Costello
Ms. Danner
Mr. DeMint
Mr. Doolittle
Mr. Duncan
Mr. Ehlers
Mr. Ewing
Mr. Filner
Mrs. Fowler
Mr. Franks
Mr. Gilchrest
Mr. Holden
Mr. Horn
Mr. Hutchinson
Ms. Johnson
Mrs. Kelly
Mr. Kuykendall
Mr. Lahood
Mr. Lampson
Mr. LaTourette
Mr. LoBiondo
Mr. McGovern
Mr. Mascara
Mr. Menendez
Mr. Metcalf
Mr. Mica
Ms. Millender-McDonald
Mr. Miller
Mr. Morgan
Mr. Ney
Ms. Norton
Mr. Oberstar
Mr. Pascrell
Mr. Pease
Mr. Petri
Mr. Quinn
Mr. Rahall
Mr. Sandlin
Mr. Sherwood
Mr. Simpson
Mr. Sweeney
Mrs. Tauscher
Mr. Terry
Mr. Thune
Mr. Vitter
Mr. Wise
Mr. Shuster

                          Cost of Legislation

    Clause 3(d)(2) of rule XIII of the Rules of the House of 
Representatives is satisfied where a cost estimate and 
comparison prepared by the Director of the Congressional Budget 
Office (CBO) under section 402 of the Congressional Budget Act 
of 1974 has been timely submitted prior to the filing of the 
report and is included in the report. The Committee has 
received no cost estimate and comparison. When available it 
will be printed in the Congressional Record.

                        Committee Cost Estimate

    The changes in railroad employee benefits proposed by H.R. 
4844 are estimated to result in an increase in budget authority 
of approximately $112 million in 2001, and $1.3 billion for the 
five-year period from 2001 through 2005. The changes in 
railroad taxes proposed by the bill are estimated to result in 
a decrease in revenues of approximately $87 million in 2001, 
and $1.4 billion for the five-year period from 2001 through 
2005.
    In addition to these benefit payment increases and payroll 
tax decreases, H.R. 4844 would authorize the transfer of the 
balance currently held in the Rail Industry Pension Fund to the 
newly created Railroad Retirement Investment Trust (RRIT). The 
RRIT would be authorized to invest this balance in a 
diversified portfolio, including corporate stocks and bonds, 
similar to other multi-employer pension funds.
    The scoring of investments such as those authorized by H.R. 
4844 is currently an unresolved issue of budget concepts. There 
are two options for scoring investments held outside of the 
U.S. Treasury. Under a conventional budget treatment, any 
investments made by the RRIT outside of U.S. Treasury 
securities would be scored as an immediate outlay, since the 
cash would physically be leaving the Treasury. This 
conventional budget treatment makes no distinction between 
Government expenditures to purchase goods or services, and 
Government expenditures to purchase financial assets. In terms 
of personal finance, this is the equivalent of saying that 
writing a $1,000 check from your checking account to purchase 
shares in a mutual fund is the same as writing a $1,000 check 
to finance a vacation. This conventional budget treatment would 
result in H.R. 4844 being scored as causing an increase in 
outlays of approximately $15 billion in FY 2001.
    Alternatively, investments made by the RRIT outside of 
Treasury could be considered to be a non-scoreable means of 
financing. Under this alternative budget treatment, the upfront 
investment by the RRIT in corporate stocks and bonds would not 
be scored as outlays. In addition, the increased rate of return 
that would be earned on the investments make outside of 
Treasury would be scored as increased revenues to the 
Government, thereby offsetting in part the costs of the 
increased benefits and decreased taxes discussed above. The 
Committee believes that this alternative budget treatment is 
more appropriate than the conventional budget treatment in this 
case, as it better reflects the true cost of H.R. 4844.
    The Committee will file a supplemental report containing a 
cost estimate prepared by the Congressional Budget Office 
pursuant to section 402 of the Congressional Budget Act when it 
becomes available.

                    Compliance With House Rule XIII

    1. Pursuant to clause 3(c)(1) of rule XIII of the Rules of 
the House of Representatives, oversight findings and 
recommendations have been made by the Committee as reflected in 
this report.
    2. With respect to the requirement of clause 3(c)(2) of 
rule XIII of the Rules of the House of Representatives, and 
308(a) of the Congressional Budget Act of 1974, the Committee 
references the report of the Congressional Budget Office has 
not been received. When available, it will be printed in the 
Congressional Record.
    3. With respect to the requirement of clause 3(c)(4) of 
rule XIII of the Rules of the House of Representatives, the 
Committee has received no report of oversight findings and 
recommendations from the Committee on Government Reform on the 
subject of H.R. 4844.
    4. With respect to the requirement of clause 3(c)(3) of 
rule XIII of the Rules of the House of Representatives and 
section 402 of the Congressional Budget Act of 1974, a cost 
estimate from the Director of Congressional Budget Office (CBO) 
is not available.

                   Constitutional Authority Statement

    Pursuant to clause (3)(d)(1) of Rule XIII of the Rules of 
the House of Representatives, committee reports on a bill or 
joint resolution of a public character shall include a 
statement citing the specific powers granted to the Congress in 
the Constitution to enact the measure. The Committee on 
Transportation and Infrastructure finds that Congress has the 
authority to enact this measure pursuant to its powers granted 
under article I, section 8 of the Constitution.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act. (Public Law 104-4.)

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                Applicability to the Legislative Branch

    The Committee finds that the legislation does not relate 
and conditions of employment or access to public service or 
accommodations within the meaning of Section 102(b)(3) of the 
Congressional Accountability Act. (Public Law 104-1.)

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

RAILROAD RETIREMENT ACT OF 1974

           *       *       *       *       *       *       *



                    annuity eligibility requirements

  Sec. 2. (a)(1) The following-described individuals, if they 
shall have completed ten years of service or, for purposes of 
paragraphs (i), (iii), and (v), five years of service, all of 
which accrues after December 31, 1995, and shall have filed 
application for annuities, shall, subject to the conditions set 
forth in subsections (e), (f), and (h), be entitled to 
annuities in the amounts provided under section 3 of this Act--
          (i)  * * *

           *       *       *       *       *       *       *

  (4) An individual who is entitled to an annuity under 
paragraph (v) of subdivision (1), but who does not have at 
least ten years of service, shall, prior to the month in which 
the individual attains age 62, be entitled only to an annuity 
amount computed under section 3(a) of this Act (without regard 
to section 3(a)(2) of this Act) or section 3(f)(3) of this Act. 
Upon attainment of age 62, such an individual may also be 
entitled to an annuity amount computed under section 3(b), but 
such annuity amount shall be reduced for early retirement in 
the same manner as if the individual were entitled to an 
annuity under section 2(a)(1)(iii).

           *       *       *       *       *       *       *

  (d)(1) The following described survivors of a deceased 
employee who will have completed ten years of service or five 
years of service, all of which accrues after December 31, 1995, 
and will have had a current connection with the railroad 
industry at the time of his death shall, subject to the 
conditions set forth in subsections (g) and (h), be entitled to 
annuities, if they have filed application therefor, in the 
amounts provided under section 4 of this Act--
          (i)  * * *

           *       *       *       *       *       *       *

  (i) An individual entitled to an annuity under this section 
who has completed five years of service, all of which accrues 
after 1995, but who has not completed ten years of service, and 
the spouse, divorced spouse, and survivors of such individual, 
shall not be entitled to an annuity amount provided under 
section 3(a), section 4(a), or section 4(f) of this Act unless 
the individual, or the individual's spouse, divorced spouse, or 
survivors, would be entitled to a benefit under the Social 
Security Act on the basis of the individual's employment record 
under both the Railroad Retirement Act and the Social Security 
Act.

                   computation of employee annuities

    Sec. 3. (a)(1)  * * *
  (2) For purposes of this subsection, individuals entitled to 
an annuity under section 2(a)(1)(ii) of this Act shall, except 
for the purposes of recomputations in accordance with section 
215(f) of the Social Security Act, be deemed to have attained 
retirement age (as defined by section 216(l) of the Social 
Security Act). For purposes of this subsection, individuals 
entitled to an annuity under paragraph (iv) or (v) of such 
section 2(a)(1) shall be deemed to be entitled to a disability 
insurance benefit under section 223 of the Social Security Act.
  [(3) In lieu of an annuity amount provided under subdivision 
(1), the annuity of an individual entitled to an annuity under 
paragraph (ii) of section 2(a)(1) of this Act which begins to 
accrue before the individual attains age 62 shall be in an 
amount equal to--
          [(i) for each month prior to the first month 
        throughout which the individual is age 62, the amount 
        (after any reduction on account of age but before any 
        deductions on account of work) of the old-age insurance 
        benefit to which such individual would have been 
        entitled under the Social Security Act as of the date 
        on which such individual's annuity begins to accrue if 
        such individual had attained age 62 on the first day of 
        the month in which his or her annuity begins to accrue 
        and if all of such individual's service as an employee 
        after December 31, 1936, had been included in the term 
        ``employment'' as defined in that Act, using for 
        purposes of this computation the number of benefit 
        computation years applicable to a person born in the 
        year in which such individual was born; and
          [(ii) for months beginning with the first month 
        throughout which the individual is age 62, the amount 
        (after any reduction on account of age but before any 
        deductions on account of work) of the old-age insurance 
        benefit to which such individual would have been 
        entitled under the Social Security Act if all of such 
        individual's service as an employee after December 31, 
        1936, had been included in the term ``employment'' as 
        defined in that Act.]
  (3) If an individual entitled to an annuity under section 
2(a)(1)(i) or (iii) of this Act on the basis of less than ten 
years of service is entitled to a benefit under section 202(a), 
section 202(b), or section 202(c) of the Social Security Act 
which began to accrue before the annuity under section 
2(a)(1)(i) or (iii) of this Act, the annuity amount provided 
such individual under this subsection, shall be computed as 
though the annuity under this Act began to accrue on the later 
of (A) the date on which the benefit under section 202(a), 
section 202(b), or section 202(c) of the Social Security Act 
began or (B) the date on which the individual first met the 
conditions for entitlement to an age reduced annuity under this 
Act other than the conditions set forth in sections 2(e)(1) and 
2(e)(2) of this Act and the requirement that an application be 
filed.

           *       *       *       *       *       *       *

  (f)[(1) If the total amount of an individual's annuity and 
supplemental annuity computed under the preceding subsections 
of this section would, before any reductions on account of age, 
before any reduction due to such individual's entitlement to a 
monthly insurance benefit under the Social Security Act, and 
disregarding any increases in such total amount which become 
effective after the date on which such individual's annuity 
under section 2(a)(1) of this Act begins to accrue, exceed an 
amount equal to the sum of (A) 100 per centum of his ``final 
average monthly compensation'' up to an amount equal to 50 per 
centum of one-twelfth of the maximum annual taxable ``wages'' 
(as defined in section 3121 of the Internal Revenue Code of 
1954) for the calendar year in which such individual's annuity 
under section 2(a)(1) of this Act begins to accrue, plus (B) 80 
per centum of so much of his ``final average monthly 
compensation'' as exceeds 50 per centum of one-twelfth of the 
maximum annual taxable ``wages'' (as defined in section 3121 of 
the Internal Revenue Code of 1954) for the calendar year in 
which such individual's annuity under section 2(a)(1) of this 
Act begins to accrue, the supplemental annuity of such 
individual first, and then, if necessary, the annuity amount of 
such individual as computed under subsection (b) of this 
section, shall be reduced until such total amount of such 
individual's annuity and supplemental annuity equals such sum 
or until such supplemental annuity and such annuity amount 
computed under subsection (b) of this section are reduced to 
zero, whichever occurs first: Provided, however, That the 
provisions of this subdivision shall not operate to reduce the 
total amount of an individual's annuity and supplemental 
annuity computed under the preceding subsections of this 
section below $1,200. For purposes of this subdivision, the 
``final average monthly compensation'' of an individual shall 
except as provided in the following sentence be determined by 
dividing the total compensation received by such individual in 
the two calendar years, consecutive or otherwise, in which he 
was credited with the highest total compensation during the 
ten-year period ending with December 31 of the year in which 
such individual's annuity under section 2(a)(1) of this Act 
begins to accrue by 24. If the individual's ``average monthly 
compensation'' is determined under subdivision (2) of 
subsection (b) of this section, the ``final average monthly 
compensation'' for such individual shall be the average of the 
compensation for the 24 months in which the compensation 
determined for the purpose of subdivision (2) of subsection (b) 
of this section is the highest. For purposes of this 
subdivision, the term ``compensation'' shall include 
``compensation'' as defined in section 1(h) of this Act, 
``wages'' as defined in section 209 of the Social Security Act, 
``self-employment income'' as defined in section 211(b) of the 
Social Security Act, and wages deemed to have been paid under 
section 217 or 229 of the Social Security Act on account of 
military service: Provided, however, That in no case shall the 
compensation with respect to any calendar month exceed the 
limitation on the compensation for such month prescribed in 
subsection (j) of this section. Wages and self-employment 
income included as compensation for purposes of this 
subdivision shall, in the absence of evidence to the contrary, 
be presumed to have been paid in equal proportions with respect 
to all months in the calendar quarter in which credited, in the 
case of wages paid before 1978, or in equal proportions with 
respect to all months in the calendar year in which credited, 
in the case of self-employment income and in the case of wages 
paid after 1977.]

           *       *       *       *       *       *       *


              computation of spouse and survivor annuities

  Sec. 4. (a)(1)  * * *
  (2) For purposes of this subsection, [if an individual is 
entitled to an annuity under paragraph (ii) of section 2(a)(1) 
of this Act which did not begin to accrue before such 
individual attained age 62, the spouse of such individual 
entitled to an annuity under clause (B) of paragraph (ii) of 
section 2(c)(1) of this Act] a spouse entitled to an annuity 
under section 2(c)(1)(ii)(B) of this Act shall be deemed to 
have attained retirement age (as defined in section 216(l) of 
the Social Security Act.
  [(3) In the case of an individual entitled to an annuity  
under section 2(a)(1)(ii) of this Act which began to accrue 
before such individual attained age 62, the annuity of the 
spouse of such individual under section 2(c) of this Act shall, 
in lieu of an annuity amount provided under subdivision (1), be 
in an amount equal to--
          [(i) for each month prior to the first month 
        throughout which both the individual and the spouse are 
        age 62, 50 per centum of that portion of the 
        individual's annuity as is, or was prior to such 
        individual's attaining age 62, computed under section 
        3(a)(3)(i) of this Act, reduced to the same extent such 
        amount would be reduced under section 202(b)(4) of the 
        Social Security Act (in the case of a wife) or under 
        section 202(c)(2) of the Social Security Act (in the 
        case of a husband) as if such amount were a wife's 
        insurance benefit or a husband's insurance benefit, 
        respectively, under such Act; and
          [(ii) for months beginning with the first month 
        throughout which both the individual and the spouse are 
        age 62, the amount (after any reduction on account of 
        age are based on the spouse's age at the time the 
        amount under this paragraph first becomes payable but 
        before any deductions on account of work) of the wife's 
        insurance benefit or the husband's insurance benefit to 
        which such spouse would have been entitled under the 
        Social Security Act if the individual's service as an 
        employee after December 31, 1936, had been included in 
        the term ``employment'' as defined in that Act.
  [(4) In the case of an individual entitled to an annuity 
under paragraph (iv) or (v) of section 2(a)(1) of this Act, the 
annuity of the spouse of such individual entitled to an annuity 
under section 2(c)(1)(ii)(B) of this Act shall, in lieu of an 
annuity amount provided under subdivision (1), be in an amount 
equal to the amount (after any reduction on account of age but 
before any deductions on account of work) of the wife's 
insurance benefit or the husband's insurance benefit to which 
such spouse would have been entitled under the Social Security 
Act if the individual's service as an employee after December 
31, 1936, had been included in the term ``employment'' as 
defined in that Act. For purposes of this subdivision, spouses 
who have not attained age 62 shall be deemed to have attained 
age 62.]
  (3) If a spouse entitled to an annuity under section 
2(c)(1)(ii)(A), section 2(c)(1)(ii)(C), or section 2(c)(2) of 
this Act or a divorced spouse entitled to an annuity under 
section 2(c)(4) of this Act on the basis of the employment 
record of an employee who will have completed less than 10 
years of service is entitled to a benefit under section 202(a), 
section 202(b), or section 202(c) of the Social Security Act 
which began to accrue before the annuity under section 
2(c)(1)(ii)(A), section 2(c)(1)(ii)(C), section 2(c)(2), or 
section 2(c)(4) of this Act, the annuity amount provided under 
this subsection shall be computed as though the annuity under 
this Act began to accrue on the later of (A) the date on which 
the benefit under section 202(a), section 202(b), or section 
202(c) of the Social Security Act began or (B) the first date 
on which the annuitant met the conditions for entitlement to an 
age reduced annuity under this Act other than the conditions 
set forth in sections 2(e)(1) and 2(e)(2) of this Act and the 
requirement that an application be filed.

           *       *       *       *       *       *       *

  [(c) If (A) the total amount of the annuity of a spouse of an 
individual as computed under the preceding subsections of this 
section as of the date on which the annuity of such individual 
under section 2(a)(1) of this Act began to accrue (before any 
reduction due to such spouse's entitlement to a monthly 
insurance benefit under the Social Security Act) plus (B) the 
total amount of the annuity and supplemental annuity of the 
individual (before any reduction due to such individual's 
entitlement to a monthly insurance benefit under the Social 
Security Act) subject to the provisions of section 3(f)(1) of 
this Act would, before any reductions in the amounts specified 
in clauses (A) and (B) on account of age and disregarding any 
increases in such amounts which become effective after the date 
on which the individual's annuity under section 2(a)(1) of this 
Act began to accrue, exceed the amount determined under clauses 
(A) and (B) of section 3(f)(1) of this Act, the portion of the 
annuity of such spouse determined under subsection (b) of this 
section as of the date on which the individual's annuity under 
section 2(a)(1) began to accrue shall be reduced until the sum 
of the amounts specified in clauses (A) and (B) of the 
subsection equals the amount determined under clauses (A) and 
(B) of section 3(f)(1) or until such amount under subsection 
(b) is reduced to zero, whichever occurs first. If, after such 
amount under subsection (b) is reduced to zero, the sum of the 
remaining amounts specified in clauses (A) and (B) of this 
subsection still exceeds the amount determined under clauses 
(A) and (B) of section 3(f)(1), the supplemental annuity of the 
individual first, and then, if necessary, the annuity amount of 
the individual computed under subsections (b), (c), and (d) of 
section 3 as of the date on which the individual's annuity 
under section 2(a)(1) began to accrue, shall be reduced until 
the amounts specified in clauses (A) and (B) of this subsection 
equals the amounts determined under clauses (A) and (B) of 
section 3(f)(1) or until such supplemental annuity and such 
annuity amount are reduced to zero, whichever occurs first. 
Notwithstanding the preceding provisions of this subsection, 
the provisions of thissubsection shall not operate to reduce 
the total of the amounts specified in clauses (A) and (B) of this 
subsection below $1,200.]

           *       *       *       *       *       *       *

  (g)(1)  * * *

           *       *       *       *       *       *       *

  (10)(i) If for any month the unreduced annuity provided under 
this section for a widow or widower is less than the widow's or 
widower's initial minimum amount computed pursuant to paragraph 
(ii) of this subdivision, the unreduced annuity shall be 
increased to that initial minimum amount. For the purposes of 
this subdivision, the unreduced annuity is the annuity without 
regard to any deduction on account of work, without regard to 
any reduction for entitlement to an annuity under section 
2(a)(1) of this Act, without regard to any reduction for 
entitlement to a benefit under title II of the Social Security 
Act, and without regard to any reduction for entitlement to a 
public service pension pursuant to sections 202(e)(7), 
202(f)(2), or section 202(g)(4) of the Social Security Act.
  (ii) For the purposes of this subdivision, the widow or 
widower's initial minimum amount is the amount of the unreduced 
annuity computed at the time an annuity is awarded to that 
widow or widower, except that--
          (A) in subsection (g)(1)(i) ``100 per centum'' shall 
        be substituted for ``50 per centum''; and
          (B) in subsection (g)(2)(ii) ``130 per centum'' shall 
        be substituted for ``80 per centum'' both places it 
        appears.
  (iii) If a widow or widower who was previously entitled to a 
widow's or widower's annuity under section 2(d)(1)(ii) of this 
Act becomes entitled to a widow's or widow's annuity under 
section 2(d)(1)(i) of this Act, a new initial minimum amount 
shall be computed at the time of award of the widow's or 
widower's annuity under section 2(d)(1)(i) of this Act.

           *       *       *       *       *       *       *


                   annuity beginning and ending dates

  Sec. 5. (a)  * * *

           *       *       *       *       *       *       *

  (b) An application for any payment under this Act shall be 
made and filed in such manner and form as the Board may 
prescribe. [An application filed with the Board for an annuity 
under this Act shall, unless the applicant specified otherwise, 
be deemed to be an application for any benefit to which such 
applicant may be entitled under this Act or title II of the 
Social Security Act.] An application filed with the Board for 
an employee annuity, spouse annuity, or divorced spouse annuity 
on the basis of the employment record of an employee who will 
have completed less than ten years of service shall be deemed 
to be an application for any benefit to which such applicant 
may be entitled under this Act or section 202(a), section 
202(b), or section 202(c) of the Social Security Act. An 
application filed with the Board for an annuity on the basis of 
the employment record of an employee who will have completed 
ten years of service shall, unless the applicant specified 
otherwise, be deemed to be an application for any benefit to 
which such applicant may be entitled under this Act or title II 
of the Social Security Act. An individual who was entitled to 
an annuity under paragraph (iv) or (v) of section 2(a)(1) of 
this Act for the month preceding the month in which he attained 
retirement age (as defined in section 216(l) of the Social 
Security Act), shall be deemed to have filed an application for 
an annuity under paragraph (i) of section 2(a)(1) on the date 
on which he attained retirement age (as defined in section 
216(l) of the Social Security Act), and a widow or widower who 
was entitled to an annuity under section 2(d)(1) of this Act on 
the basis of disability for the month preceding the month in 
which she or he attained age 60, shall be deemed to have filed 
an application for an annuity under such section 2(d)(1) on the 
basis of age on the date on which she or he attained age 60.

           *       *       *       *       *       *       *


                           lump-sum payments

  Sec. 6. (a)  * * *

           *       *       *       *       *       *       *

  (e)(1) Every individual who will have completed ten years of 
service or five or more years of service, all of which accrues 
after December 31, 1995, at the time of his retirement or 
death, who will have received compensation in the nature of 
separation of severance pay on or after January 1, 1985, and 
who would have been credited with additional months of service 
pursuant to section 3(i)(4) of this Act except for the fact 
that such individual was not in an employment relation to one 
or more employers nor an employee representative in such 
months, shall, at the time his annuity under section 2(a)(1) of 
this Act begins to accrue, be entitled to a lump sum in the 
amount provided under subdivision (2) of this subsection. If 
the full amount of a lump sum under this subsection cannot be 
determined at the time an individual's annuity under section 
2(a)(1) begins to accure, such lump sum shall be payable at 
such time thereafter as such amount can be determined. If an 
individual otherwise eligible for a lump sum under this section 
dies before he becomes entitled to an annuity under section 
2(a)(1), or before he receives payment of such lump sum, such 
lump sum shall be payable to the person, if any, who is 
determined by the Board to be such individual's widow or 
widower and who will not have died before receiving payment of 
such lump sum. If there be no such widow or widower, such lump 
sum shall be payable to the children, grandchildren, parents, 
brothers and sisters, or the estate of the deceased individual 
in the same manner as if such lump sum were a lump sum payable 
under subsection (c)(1) of this section.

           *       *       *       *       *       *       *


                     powers and duties of the board

  Sec. 7. (a)  * * *
  (b)(1)  * * *
  (2) In the case of--
          (A) an individual who will have completed ten years 
        of service or five or more years of service, all of 
        which accrues after December 31, 1995, creditable under 
        this Act,

           *       *       *       *       *       *       *

  [(4) The Board shall from time to time certify to the 
Secretary of the Treasury the name and address of each 
individual entitled to receive a payment, the amount of such 
payment, and the time at which it should be made, and the 
Secretary of the Treasury through the Division of Disbursements 
of the Treasury Department, and prior to audit by the General 
Accounting Office, shall make payment in accordance with the 
certification by the Board.]
  (4)(A) The Railroad Retirement Board, after consultation with 
the Board of Trustees of the Railroad Retirement Trust and the 
Secretary of the Treasury, shall enter into an arrangement with 
a nongovernmental financial institution to serve as disbursing 
agent for benefits payable under this Act who shall disburse 
consolidated benefits under this Act to each recipient.
  (B) The Board shall from time to time certify--
          (i) to the Secretary of the Treasury the amounts 
        required to be transferred from the Social Security 
        Equivalent Benefit Account and the the Dual Benefits 
        Payments Account to the disbursing agent to make 
        payments of benefits and the Secretary of the Treasury 
        shall transfer those amounts;
          (ii) to the Board of Trustees of the Railroad 
        Retirement Investment Trust the amounts required to be 
        transferred from the Railroad Retirement Investment 
        Trust to the disbursing agent to make payments of 
        benefits and the Board of Trustees shall transfer those 
        amounts; and
          (iii) to the disbursing agent the name and address of 
        each individual entitled to receive a payment, the 
        amount of such payment, and the time at which the 
        payment should be made.

           *       *       *       *       *       *       *

  (c)(1) Benefit payments determined by the Board to be payable 
under this Act shall be made [from the Railroad Retirement 
Account] by the disbursing agent under subsection (b)(4) from 
money transferred to it from the Railroad Retirement Trust Fund 
or the Social Security Equivalent Benefit Account, as the case 
may be, except that [payments of supplemental annuities under 
section 2(b) of this Act shall be made from the Railroad 
Retirement Supplemental Account, and] payments of annuity 
amounts made under sections 3(h), 4(e), and 4(h) of this Act 
and under sections 204(a)(3), 204(a)(4), 206(3), and 207(3) of 
Public Law 93-445 shall be made by the disbursing agent under 
subsection (b)(4) from money transferred to it from the Dual 
Benefits Payments Account. In any fiscal year, the total 
amounts paid under such sections shall not exceed the total 
sums appropriated to the Dual Benefits Payments Account for 
that fiscal year. The Board shall prescribe regulations for 
allocation of annuity amounts which would without regard to 
such regulations be payable under sections 3(h), 4(e), and 4(h) 
of this Act and sections 204(a)(3), 204(a)(4), 206(3), and 
207(3) of Public Law 93-445 so that the sums appropriated to 
the Dual Benefits Payments Account for a fiscal year so far as 
practicable, are expended in equal monthly installments 
throughout such fiscal year, and aredistributed so that 
recipients are paid annuity amounts which bear the same ratio to the 
annuity amounts such recipients would have received but for such 
regulations as the ratio of the total sums appropriated to pay such 
annuity amounts bear to the total sums necessary to pay such annuity 
amounts without regard to such regulations. Notwithstanding any other 
provision of law, the entitlement of an individual to an annuity amount 
under section 3(h), 4(e), or 4(h) of this Act or section 204(a)(3), 
204(a)(4), 206(3), or 207(3) of Public Law 93-445 for any month in 
which the amount payable to such individual is allocated under the 
regulations prescribed by the Board under this subsection shall not 
exceed the amount so allocated for that month to such individual.

           *       *       *       *       *       *       *


                      railroad retirement account

  Sec. 15. (a) The Railroad Retirement Account established by 
section 15(a) of the Railroad Retirement Act of 1937 shall 
continue to be maintained in the Treasury of the United States. 
There is hereby appropriated to such Account for each fiscal 
year, beginning with the fiscal year ending June 30, 1975, to 
provide for the payment of benefits to be made from such 
Account in accordance with the provisions of section 7(c)(1) of 
this Act, and to provide for expenses necessary for the Board 
in the administration of all provisions of this Act, an amount 
equal to amounts covered into the Treasury (minus refunds) 
during each fiscal year under the Railroad Retirement Tax Act[, 
except those portions of the amounts covered into the Treasury 
under sections 3211(b), 3221(c), and 3221(d) of such Tax Act as 
are necessary to provide sufficient funds to meet the 
obligation to pay supplemental annuities at the level provided 
under section 3(e) of this Act and, with respect to those 
entitled to supplemental annuities under section 205(a) of 
title II of this Act, at the level provided under section 
205(a). The Board is directed to determine what portion of the 
taxes collected under sections 3211(b), 3221(c), and 3221(d) of 
the Railroad Retirement Tax Act is to be credited to the 
Railroad Retirement Account pursuant to the preceding 
provisions of this subsection and what portion of such taxes is 
to be credited to the Railroad Retirement Supplemental Account 
pursuant to the provisions of subsection (c) of this section. 
The Board shall make such a determination with respect to each 
calendar quarter commencing with the quarter beginning January 
1, 1975, shall make each such determination not later than 
fifteen days before each calendar quarter, and shall, as soon 
as practicable after each such determination, advise the 
Secretary of the Treasury of the determination made. The 
Secretary of the Treasury shall credit the amounts covered into 
the Treasury under sections 3211(b), 3221(c), and 3221(d) of 
the Railroad Retirement Tax Act to the Railroad Retirement 
Account and the Railroad Retirement Supplemental Account in 
such proportions as is determined by the Board pursuant to the 
provisions of this subsection].

           *       *       *       *       *       *       *

  [(c) The Railroad Retirement Supplemental Account established 
by section 15(b) of the Railroad Retirement Act of 1937 shall 
continue to be maintained in the Treasury of the United States. 
There is hereby appropriated to such account for each fiscal 
year, beginning with the fiscal year ending June 30, 1975, out 
of any moneys in the Treasury not otherwise appropriated, to 
provide for the payment of supplemental annuities under section 
2(b) of this Act, and to provide for the expenses necessary for 
the Board in the administration of the payment of such 
supplemental annuities, an amount equal to such portions of the 
amounts covered into the Treasury (minus refunds) during each 
fiscal year under sections 3211(b), 3221(c), and 3221(d) of the 
Railroad Retirement Tax Act as are not appropriated to the 
Railroad Retirement Account pursuant to the provisions of 
subsection (a) of this section. Whenever the Board finds at any 
time that the balance in the Railroad Retirement Supplemental 
Account will be insufficient to pay the supplemental annuities 
which it estimates are due, or will become due, under section 
2(b) of this Act, it shall request the Secretary of the 
Treasury to transfer from the Railroad Retirement Account to 
the credit of the Railroad Retirement Supplemental Account such 
moneys as the Board estimates would be necessary for the 
payment of such supplemental annuities, and the Secretary shall 
make such transfer. Whenever the Board finds that the balance 
in the Railroad Retirement Supplemental Account, without regard 
to the amounts transferred pursuant to the next preceding 
sentence, is sufficient to pay such supplemental annuities, it 
shall request the Secretary of the Treasury to retransfer from 
the Railroad Retirement Supplemental Account to the credit of 
the Railroad Retirement Account such moneys as in its judgment 
are not needed for the payment of such supplemental annuities, 
plus interest at an annual rate equal to the average rate of 
interest borne by all special obligations held by the Railroad 
Retirement Account on the last day of the preceding fiscal 
year, rounded to the nearest multiple of one-eight of 1 per 
centum, and the Secretary shall make such retransfer.]
  (d)(1) There is hereby created an account in the Treasury of 
the United States to be known as the Dual Benefits Payments 
Account. There is hereby authorized to be appropriated to such 
account for each fiscal year beginning with the fiscal year 
ending September 30, 1982, such sums as are necessary to pay 
during such fiscal year the amounts of annuities estimated by 
the Board to be paid under sections 3(h), 4(e), and 4(h) of 
this Act and under sections 204(a)(3), 204(a)(4), 206(3), and 
207(3) of Public Law 93-445. Not more than 30 days prior to 
each fiscal year beginning with the fiscal year ending 
September 30, 1982, the Board may request the Secretary of the 
Treasury to transfer from the Railroad Retirement Account to 
the credit of the Dual Benefits Payments Account any amount not 
exceeding the amount that the Board estimates will be necessary 
to pay on the first day of the next succeeding month the 
annuity amounts under sections 3(h), 4(e), and 4(h) of this Act 
and under sections 204(a)(3), 204(a)(4), 206(3), and 207(3) of 
Public Law 93-445, taking into account any reduction in such 
annuity amounts as determined under section 7(c)(1) of this 
Act, and the Secretary of the Treasury shall make such 
transfer, but at no time shall the total amount of money 
outstanding to the Dual Benefits Payments Account from the 
Railroad Retirement Account exceed the amount necessary to pay 
the annuity amounts under sections 3(h), 4(e), and 4(h) of this 
Act and sections 204(a)(3), 204(a)(4), 206(3), and 207(3) of 
Public Law 93-445 for one month. Not more than 10 days after 
the funds appropriated to the Dual Benefits Payments Account 
for each such fiscal year are received into such Account, the 
Board shall request the Secretary of the Treasury to retransfer 
from the Dual Benefits Payments Account to the credit of the 
Railroad Retirement Account an amount equal to the amount 
transferred to the Dual Benefits Payments Account prior to or 
during such fiscal year under the preceding sentence, together 
with such additional amount determined by the Board to be equal 
to the loss of interest to the Railroad Retirement Account 
resulting from such transfer, and the Secretary of the Treasury 
shall make such retransfer. The Secretary of the Treasury shall 
from time to time transfer from the Dual Benefits Payments 
Account to the disbursing agent under section 7(b)(4) amounts 
necessary to pay benefits payable from that Account.

           *       *       *       *       *       *       *

  (e) At the request and direction of the Board, it shall be 
the duty of the Secretary of the Treasury (hereinafter referred 
to as the ``Secretary'') to invest such portion of the amounts 
credited to the Railroad Retirement Account[, the Dual Benefits 
Payments Account and the Railroad Retirement Supplemental 
Account as, in the judgment of the Board, is not immediately 
required for the payment of annuities, supplemental annuities, 
and death benefits. Such investments may be made only] and the 
Dual Benefits Payments Account as are not transferred to the 
Railroad Retirement Investment Trust as the Board may determine 
in interest-bearing obligations of the United States or in 
obligations guaranteed as to both principal and interest by the 
United States. For such purpose such obligations may be 
acquired (A) on original issue at the issue price; or (B) by 
purchase of outstanding obligations at the market price. The 
purposes for which obligations of the United States may be 
issued under [the Second Liberty Bond Act, as amended] chapter 
31 of title 31, are hereby extended to authorize the issuance 
at par of special obligations exclusively to the accounts. Such 
obligations issued for purchase by the accounts shall have 
maturities fixed with due regard for the needs of the accounts, 
and shall bear interest at a rate equal to the average market 
yield, computed as of the end of the calendar month next 
preceding the date of such issue, borne by all marketable 
interest-bearing notes of the United States then forming a part 
of the public debt that are not due or callable until after the 
expiration of three years from the end of such calendar month, 
except that where such rate is not a multiple of one-eighth of 
1 per centum, the rate of interest on such obligations shall be 
the multiple of one-eighth of 1 per centum nearest such rate: 
Provided, That the rate of interest on such obligations shall 
in no case be less than 3 per centum per annum. At the request 
of the Board the Secretary shall purchase other interest-
bearing obligations of the United States, or obligations 
guaranteed as to both principal and interest by the United 
States, or other obligations which are lawful investments for 
trust funds of the United States, on original issue or at the 
market price: Provided, That the interest yield of such 
obligations shall not be less than the interest rate determined 
in accordance with the preceding sentence. At the requestof the 
Board, the Secretary shall sell at the market price such obligations in 
the accounts (other than special obligations issued exclusively to the 
accounts) as the Board designates. The Board shall from time to time 
request the Secretary to redeem such special obligations issued 
exclusively to the accounts as the Board designates and upon such 
request the Secretary shall redeem such obligations at par plus accrued 
interest. All requests of the Board to the Secretary, provided for in 
this subsection, shall be mandatory upon the Secretary. It shall be the 
duty of the Board to determine at all times what proportion of the 
accounts shall be invested in other than special obligations issued to 
the accounts and further to determine which of such obligations 
available to the accounts consistent with [the foregoing requirements] 
the requirements of this subsection will provide the greatest rate of 
return on the funds invested.

           *       *       *       *       *       *       *

  (j) Railroad Retirement Investment Trust.--
          (1) Establishment.--The Railroad Retirement 
        Investment Trust (hereinafter in this subsection 
        referred to as the ``Trust'') is hereby established. 
        The Trust shall manage and invest the assets of the 
        Railroad Retirement Trust Fund (hereinafter in this 
        section referred to as the Fund'', which is hereby 
        established as a trust organized in the District of 
        Columbia and shall, to the extent not inconsistent with 
        this Act, be subject to the laws of the District of 
        Columbia applicable to such trusts.
          (2) Not a federal agency or instrumentality.--The 
        Trust is not a department, agency, or instrumentality 
        of the Government of the United States and shall not be 
        subject to title 31, United States Code.
          (3) Board of trustees.--
                  (A) Generally.--The Trust shall have a Board 
                of Trustees, consisting of 7 members, each 
                appointed by a unanimous vote of the Railroad 
                Retirement Board. The Railroad Retirement Board 
                may remove any member so appointed by unanimous 
                vote. Of the 7 members, 3 shall represent the 
                interests of labor, 3 shall represent the 
                interests of management, and 1 shall represent 
                the interests of the general public. The 
                members of the Board of Trustees shall not be 
                considered officers or employees of the 
                Government of the United States.
                  (B) Qualifications.--Members of the Board of 
                Trustees shall be appointed only from among 
                persons who have experience and expertise in 
                the management of financial investments and 
                pension plans. No member of the Railroad 
                Retirement Board shall be eligible to be a 
                member of the Board of Trustees.
                  (C) Terms.--Except as provided in this 
                subparagraph, each member shall be appointed 
                for a 3-year term. The initial members 
                appointed under this paragraph shall be divided 
                into 3 equal groups so nearly as may be, of 
                which one group will be appointed for a 1-year 
                term, one for a 2-year term, and one for a 3-
                year term. A vacancy in the Board of Trustees 
                shall not affect the powers of the Board of 
                Trustees and shall be filled in the same manner 
                as the selection of the member whose departure 
                caused the vacancy. Upon the expiration of a 
                term of a member of the Board of Trustees, that 
                member shall continue to serve until a 
                successor is appointed.
          (4) Powers of the board of trustees.--The Board of 
        Trustees shall--
                  (A) retain independent advisers to assist it 
                in the formulation and adoption of its 
                investment guidelines;
                  (B) retain independent investment managers to 
                invest the assets of the Fund in a manner 
                consistent with such investment guidelines;
                  (C) invest assets in the Fund, pursuant to 
                the policies adopted in subparagraph (A);
                  (D) pay administrative expenses of the Fund 
                and the Trust from the money in the Fund; and
                  (E) transfer money to the disbursing agent to 
                pay benefits payable under this Act from money 
                in the Fund and administrative expenses related 
                to those benefits.
          (5) Reporting requirements and fiduciary standards.--
        The following reporting requirements and fiduciary 
        standards shall apply with respect to the Railroad 
        Retirement Trust and the Railroad Retirement Trust Fund 
        (and the assets held in such Trust Fund):
                  (A) Duties of the board of trustees.--The 
                Railroad Retirement Trust and each member of 
                the Board of Trustees shall discharge their 
                duties with respect to the assets of the Fund 
                solely in the interest of the Railroad 
                Retirement Board and through it, the 
                participants and beneficiaries of the programs 
                funded under this Act--
                          (i) for the exclusive purpose of--
                                  (I) providing benefits to 
                                participants and their 
                                beneficiaries; and
                                  (II) defraying reasonable 
                                expenses of administering the 
                                functions of the Trust;
                          (ii) with the care, skill, prudence, 
                        and diligence under the circumstances 
                        then prevailing that a prudent person 
                        acting in a like capacity and familiar 
                        with such matters would use in the 
                        conduct of an enterprise of a like 
                        character and with like aims;
                          (iii) by diversifying investments so 
                        as to minimize the risk of large 
                        losses, unless under the circumstances 
                        it is clearly prudent not to do so; and
                          (iv) in accordance with Trust 
                        governing documents and instruments 
                        insofar as such documents and 
                        instruments are consistent with this 
                        Act.
                  (B) Prohibitions with respect to members of 
                the board of trustees.--No member of the Board 
                of Trustees shall--
                          (i) deal with the assets of the Fund 
                        in the trustee's own interest or for 
                        the trustee's own account;
                          (ii) in an individual or in any other 
                        capacity act in any transaction 
                        involving the assets of the Fund on 
                        behalf of a party (or represent a 
                        party) whose interests are adverse to 
                        the interests of the Trust, the Fund, 
                        the Railroad Retirement Board, or the 
                        interests of participants or 
                        beneficiaries; or
                          (iii) receive any consideration for 
                        the trustee's own personal account from 
                        any party dealing with the assets of 
                        the Fund.
                  (C) Exculpatory provisions and insurance.--
                Any provision in an agreement or instrument 
                that purports to relieve a trustee from 
                responsibility or liability for any 
                responsibility, obligation or duty under this 
                Act shall be void: Provided, however, That 
                nothing shall preclude--
                          (i) the Trust from purchasing 
                        insurance for its trustees or for 
                        itself to cover liability or losses 
                        occurring by reason of the act or 
                        omission of a trustee, if such 
                        insurance permits recourse by the 
                        insurer against the trustee in the case 
                        of a breach of a fiduciary obligation 
                        by such trustee;
                          (ii) a trustee from purchasing 
                        insurance to cover liability under this 
                        section from and for his own account; 
                        or
                          (iii) an employer or an employee 
                        organization from purchasing insurance 
                        to cover potential liability of one or 
                        more trustees with respect to their 
                        fiduciary responsibilities, 
                        obligations, and duties under this 
                        section.
                  (D) Bonding.--Every trustee and every person 
                who handles funds or other property of the Fund 
                (hereafter in this subsection referredto as 
``Trust official'') shall be bonded in accordance with the following:
                          (i) The amount of such bond shall be 
                        fixed at the beginning of each fiscal 
                        year of the Trust by the Railroad 
                        Retirement Board. Such amount shall not 
                        be less than 10 percent of the amount 
                        of the funds handled. In no case shall 
                        such bond be less than $1,000 nor more 
                        than $500,000, except that the Railroad 
                        Retirement Board, after consideration 
                        of the record, may prescribe an amount 
                        in excess of $500,000, subject to the 
                        10 per centum limitation of the 
                        preceding sentence.
                          (ii) It shall be unlawful for any 
                        Trust official to receive, handle, 
                        disburse, or otherwise exercise custody 
                        or control of any of the funds or other 
                        property of the Fund without being 
                        bonded as required by this subsection 
                        and it shall be unlawful for any Trust 
                        official, or any other person having 
                        authority to direct the performance of 
                        such functions, to permit such 
                        functions, or any of them, to be 
                        performed by any Trust official, with 
                        respect to whom the requirements of 
                        this subsection have not been met.
                          (iii) It shall be unlawful for any 
                        person to procure any bond required by 
                        this subsection from any surety or 
                        other company or through any agent or 
                        broker in whose business operations 
                        such person has any control or 
                        significant financial interest, direct 
                        or indirect.
                  (E) Audit and report.--
                          (i) The Trust shall annually engage 
                        an independent qualified public 
                        accountant to audit the financial 
                        statements of the Fund.
                          (ii) The Trust shall submit an annual 
                        management report to the Congress not 
                        later than 180 days after the end of 
                        the Trust's fiscal year. A management 
                        report under this subsection shall 
                        include--
                                  (I) a statement of financial 
                                position;
                                  (II) a statement of 
                                operations;
                                  (III) a statement of cash 
                                flows;
                                  (IV) a statement on internal 
                                accounting and administrative 
                                control systems;
                                  (V) the report resulting from 
                                an audit of the financial 
                                statements of the Trust 
                                conducted under subparagraph 
                                (E)(i); and
                                  (VI) any other comments and 
                                information necessary to inform 
                                the Congress about the 
                                operations and financial 
                                condition of the Trust and the 
                                Fund.
                          (iii) The Trust shall provide the 
                        President, the Railroad Retirement 
                        Board, and the Director of the Office 
                        of Management and Budget a copy of the 
                        management report when it is submitted 
                        to Congress.
                  (F) Enforcement.--The Railroad Retirement 
                Board may bring a civil action--
                          (i) to enjoin any act or practice by 
                        the Railroad Retirement Investment 
                        Trust, its Board of Trustees or its 
                        employees or agents that violates any 
                        provision of this Act; or
                          (ii) to obtain other appropriate 
                        relief to redress such violations, or 
                        to enforce any provisions of this Act.
          (6) Rules and administrative powers.--The Board of 
        Trustees shall have the authority to make rules to 
        govern its operations, employ professional staff, and 
        contract with outside advisers to provide legal, 
        accounting, investment advisory or other services 
        necessary for the proper administration of this 
        subsection. In the case of contracts with investment 
        advisory services, compensation for such services may 
        be on a fixed contract fee basis or on such other terms 
        and conditions as are customary for such services.
          (7) Quorum.--Five members of the Board of Trustees 
        constitute a quorum to do business. Investment 
        guidelines must be adopted by a unanimous vote of the 
        entire Board of Trustees. All other decisions of the 
        Board of Trustees shall be decided by a majority vote 
        of the quorum present. All decisions of the Board of 
        Trustees shall be entered upon the records of the Board 
        of Trustees.
  (k) Transfers to the Fund.--The Board shall, upon 
establishment of the Railroad Retirement Trust Fund and from 
time to time thereafter, direct the Secretary of the Treasury 
to transfer, in such manner as will maximize the investment 
returns to the Railroad Retirement system, that portion of the 
Railroad Retirement Account that is not needed to pay current 
administrative expenses of the Board to the Railroad Retirement 
Trust Fund. The Secretary shall make that transfer.
  (l) Railroad Retirement Trust Fund.--The Railroad Retirement 
Trust shall from time to time transfer to the disbursing agent 
described in section 7(b)(4) such amounts as may be necessary 
to pay benefits under this Act (other than benefits paid from 
the Social Security Equivalent Benefit Account or the Dual 
Benefit Payments Account).

               social security equivalent benefit account

    Sec. 15A. (a)  * * *

           *       *       *       *       *       *       *

    (c)(1) Except as otherwise provided in this section, 
amounts in the Social Security Equivalent Benefit Account shall 
be available only for purposes of paying social security 
equivalent benefits under this Act and to provide for the 
administrative expenses of the Board allocable to social 
security equivalent benefits. The Secretary shall from time to 
time transfer to the disbursing agent under section 7(b)(4) 
amounts necessary to pay those benefits.

           *       *       *       *       *       *       *

    (d)(1) Whenever the Board finds that the balance in the 
Social Security Equivalent Benefit Account will be insufficient 
to pay social security equivalent benefits which it estimates 
are due in any month, it shall request the Secretary of the 
Treasury to transfer from the Railroad Retirement Account to 
the credit of the Social Security Equivalent Benefit Account 
such moneys as the Board estimates will be necessary for the 
payment of such benefits, and the Secretary shall make such 
transfer. [Whenever later in such month there is a transfer to 
the Social Security Equivalent Benefit Account under paragraph 
(2) or (4) of section 7(c) of this Act, the amount so 
transferred shall be immediately retransferred to the Railroad 
Retirement Account. The amount retransferred under the 
preceding sentence shall not exceed the amount of any 
outstanding transfers under this paragraph from the Railroad 
Retirement Account plus such additional amounts determined by 
the Board to be equal to the loss of interest to the Railroad 
Retirement Account resulting from such outstanding transfers.]
    [(2) Whenever the Board determines that--
          [(A) amounts in the Railroad Retirement Account will 
        not be sufficient to pay the annuities which it 
        estimates are due, or will become due, from such 
        Account, and
          [(B) the transfer under this paragraph will not 
        jeopardize the present or future payment of social 
        security equivalent benefits,
the Board shall request the Secretary of the Treasury to 
transfer from the Social Security Equivalent Benefit Account to 
the Railroad Retirement Account such moneys as the Board 
estimates will be necessary for the payment of such annuities, 
and the Secretary shall make such transfer. No transfer under 
this paragraph shall be required to be repaid.]
  (2) Upon establishment of the Railroad Retirement Trust Fund 
and from time to time thereafter, the Board shall direct the 
Secretary of the Treasury to transfer, in such manner as will 
maximize the investment returns to the Railroad Retirement 
system, the balance of the Social Security Equivalent Benefit 
Account not needed to pay current benefits required to be paid 
from that Account to the Railroad Retirement Trust Fund, and 
the Secretary shall make that transfer. Any balance transferred 
under this paragraph shall be used by the Railroad Retirement 
Trust only to pay benefits under this Act or to purchase 
obligations of the United States that are backed by the full 
faith and credit of the United States pursuant to chapter 31 of 
title 31, United States Code. The proceeds of sales of, and the 
interest income from, such obligations shall be used by the 
Trust only to pay benefits under this Act.

           *       *       *       *       *       *       *


            crediting service under the social security act

  Sec. 18. (1) Except as provided in subdivision (2), the term 
``employment'' as defined in section 210 of the Social Security 
Act shall not include service performed by an individual as an 
employee as defined in section 1(b) of this Act.
  (2) For the purpose of determining (i) monthly insurance 
benefits under the Social Security Act to an employee who will 
have completed less than ten years of service or less than five 
years of service, all of which accrues after December 31, 1995, 
and to others deriving from him or her during his or her life 
and (ii) monthly insurance benefits and lump-sum death benefits 
under such Act with respect to the death of an employee who (A) 
will have completed less than ten years of service or less than 
five years of service, all of which accrues after December 31, 
1995, or (B) will have completed ten or more years of service 
or five or more years of service, all of which accrues after 
December 31, 1995, but will not have had a current connection 
with the railroad industry at the time of his death, and for 
the purposes of section 203 and section 216(i) of that Act, 
section 210(a)(9) of the Social Security Act and subdivision 
(1) of this section shall not operate to exclude from 
``employment'' under the Social Security Act service which 
would otherwise be included in such ``employment'' but for such 
sections. For such purpose, compensation paid in a calendar 
year shall, in the absence of evidence to the contrary, be 
presumed to have been paid in equal proportions with respect to 
all months in the year in which the employee will have been in 
service as an employee. In the application of the Social 
Security Act pursuant to this subdivision to service as an 
employee, all service as defined in section 1(d) of this Act 
shall be deemed to have been performed within the United 
States.

         automatic benefit eligibility requirement adjustments

  Sec. 19. (a)  * * *

           *       *       *       *       *       *       *

  (c) If section 226 or title XVII of the Social Security Act 
is amended at any time after December 31, 1974, to reduce the 
conditions of entitlement to, or to expand the nature of, the 
benefits payable thereunder, or if health care benefits in 
addition to, or in lieu of, the benefits payable under such 
section 226 or such title XVIII are provided by any provision 
of law which becomes effective at any time after December 31, 
1974, such reductions in the conditions of entitlement to 
benefits, such expanded benefits, or such additional,or 
substituted, health care benefits shall be available to every employee 
(as defined in this Act), and those deriving from him, in the same 
manner, and to the same extent, as if his service as an employee after 
December 31, 1936, had been included in the term ``employment'' as 
defined in the Social Security Act. The Board shall have the same 
authority, in accordance with regulations prescribed by it, to 
determine the rights of employees who will have completed ten years of 
service or five or more years of service, all of which accrues after 
December 31, 1995, and of those deriving from such employees, to 
benefits provided by reason of the provisions of this subsection as the 
Secretary of Health, Education, and Welfare has with respect to 
individuals insured under the Social Security Act.
  (d) Notwithstanding the provisions of subsections (a), (b), 
and (c) of this section--
          (1)  * * *
          (2) No annuity shall be payable to a person by reason 
        of subsection (a) or (b) of this section unless the 
        individual upon whose compensation and years of service 
        such annuity would be based will have (A) completed ten 
        years of service or five or more years of service, all 
        of which accrues after December 31, 1995, and (B) in 
        the case of a survivor, had a current connection with 
        the railroad industry at the time of his death.

           *       *       *       *       *       *       *


                          benefit preservation

    Sec. 22. (a)(1) On or before May 1 of each year beginning 
in 1984, the Railroad Retirement Board shall prepare a five-
year projection of anticipated revenues to and payments from 
the Railroad Retirement Account to determine the ability of 
such Account to pay benefits in each of the next succeeding 
five calendar years. On or before May 1 of each year beginning 
in 2002, the Railroad Retirement Board shall compute its 
projection of the account benefits ratio and the average 
account benefits ratio (as defined by section 3241(c) of the 
Internal Revenue Code of 1986) for each of the next succeeding 
five fiscal years. No later than July 1 of each year, the Board 
shall submit a written report to the President, the Speaker of 
the House, and the President of the Senate setting forth the 
results of [the projection prepared pursuant to the preceding 
sentence] the projections prepared pursuant to the preceding 
two sentences. If the projection indicates that the funds in 
the Railroad Retirement Account will be insufficient to pay the 
full amount of the benefits under this Act which are payable 
from that Account at any time during the five-year period, the 
Board's report shall include--
          (A)  * * *

           *       *       *       *       *       *       *



        computation and certification of account benefit ratios


  Sec. 23. (a) On or before November 1, 2002, the Railroad 
Retirement Board shall--
          (1) compute the account benefits ratios for each of 
        the most recent 10 preceding fiscal years, and
          (2) certify the account benefits ratios for each such 
        fiscal year to the Secretary.
  (b) On or before November 1 of each year after 2002, the 
Railroad Retirement Board shall--
          (1) compute the account benefits ratio for the fiscal 
        year ending in such year, and
          (2) certify the account benefits ratio for such 
        fiscal year to the Secretary.
  (c) Definition.--As used in this section, the term ``account 
benefit ratio'' has the meaning given that term in section 
3241(c) of the Internal Revenue Code of 1986.
                              ----------                              


                 SECTION 205 OF THE SOCIAL SECURITY ACT

           evidence, procedure, and certification for payment

    Sec. 205. (a)  * * *

           *       *       *       *       *       *       *

  (i) Upon final decision of the Commissioner of Social 
Security, or upon final judgment of any court of competent 
jurisdiction, that any person is entitled to any payment or 
payments under this title, the Commissioner of Social Security 
shall certify to the Managing Trustee the name and address of 
the person so entitled to receive such payment or payments, the 
amount of such payment or payments, and the time at which such 
payment or payments should be made, and the Managing Trustee, 
through the Fiscal Service of the Department of the Treasury, 
and prior to any action thereon by the General Accounting 
Office, shall make payment in accordance with the certification 
of the Commissioner of Social Security (except that in the case 
of (A) an individual who will have completed ten years of 
service or five or more years of service, all of which accrues 
after December 31, 1995, creditable under the Railroad 
Retirement Act of 1937 or the Railroad Retirement Act of 1974, 
(B) the wife or husband of such an individual, (C) any survivor 
of such an individual if such survivor is entitled, or could 
upon application become entitled, to an annuity under section 2 
of the Railroad Retirement Act of 1974, and (D) any other 
person entitled to benefits under section 202 of this Act on 
the basis of the wages and self-employment income of such an 
individual (except a survivor of such an individual where such 
individual did not have a current connection with the railroad 
industry, as defined in the Railroad Retirement Act of 1974, at 
the time of his death), such certification shall be made to the 
Railroad Retirement Board which shall provide for such payment 
or payments to such person on behalf of the Managing Trustee in 
accordance with the provisions of the Railroad Retirement Act 
of 1974): Provided, That where a review of the Commissioner's 
decision is or may be sought under subsection (g) the 
Commissioner of Social Security may withhold certification of 
payment pending such review. The Managing Trustee shall not be 
held personally liable for any payment or payments made in 
accordance with a certification by the Commissioner of Social 
Security.

           *       *       *       *       *       *       *

                              ----------                              


                     INTERNAL REVENUE CODE OF 1986

Subtitle A--Income Taxes

           *       *       *       *       *       *       *


CHAPTER 1--NORMAL TAXES AND SURTAXES

           *       *       *       *       *       *       *


Subchapter A--Determination of Tax Liability

           *       *       *       *       *       *       *


PART IV--CREDITS AGAINST TAX

           *       *       *       *       *       *       *


Subpart A--Nonrefundable Personal Credits

           *       *       *       *       *       *       *


SEC. 24 CHILD TAX CREDIT.

  (a)  * * *

           *       *       *       *       *       *       *

  (d) Additional Credit for Families With 3 or More Children.--
          (1)  * * *

           *       *       *       *       *       *       *

          (3) Social security taxes.--For purposes of paragraph 
        (1)--
                  (A) In general.--The term ``social security 
                taxes'' means, with respect to any taxpayer for 
                any taxable year--
                          (i)  * * *

           *       *       *       *       *       *       *

                          (iii) 50 percent of the taxes imposed 
                        by [section 3211(a)(1)] section 3211(a) 
                        on amounts received by the taxpayer 
                        during the calendar year in which the 
                        taxable year begins.

           *       *       *       *       *       *       *


Subchapter B--Computation of Taxable Income

           *       *       *       *       *       *       *


PART II--ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME

           *       *       *       *       *       *       *



SEC. 72. ANNUITIES; CERTAIN PROCEEDS OF ENDOWMENT AND LIFE INSURANCE 
                    CONTRACTS.

  (a)  * * *

           *       *       *       *       *       *       *

  (r) Certain Railroad Retirement Benefits Treated as Received 
Under Employer Plans.--
          (1)  * * *
          (2) Tier 2 taxes treated as contributions.--
                  (A)  * * *

           *       *       *       *       *       *       *

                  (B) Tier 2 portion.--For purposes of 
                subparagraph (A)--
                          (i) After 1984.--With respect to 
                        compensation paid after 1984, the tier 
                        2 portion shall be the taxes imposed by 
                        sections 3201(b), [3211(a)(2)] section 
                        3211(b), and 3221(b).

           *       *       *       *       *       *       *


Subchapter F--Exempt Organizations

           *       *       *       *       *       *       *


PART I--GENERAL RULE

           *       *       *       *       *       *       *



SEC. 501. EXEMPTION FROM TAX ON CORPORATIONS, CERTAIN TRUSTS, ETC.

  (a)  * * *

           *       *       *       *       *       *       *

  (c) List of Exempt Organizations.--The following 
organizations are referred to in subsection (a):
          (1)  * * *

           *       *       *       *       *       *       *

          (28) The Railroad Retirement Investment Trust 
        established under section 15(j) of the Railroad 
        Retirement Act of 1974.

           *       *       *       *       *       *       *


Subtitle C--Employment Taxes

           *       *       *       *       *       *       *


CHAPTER 22--RAILROAD RETIREMENT TAX ACT

           *       *       *       *       *       *       *


        Subchapter E. Tier 2 tax rate determination.
     * * * * * * *

Subchapter A--Tax on Employees

           *       *       *       *       *       *       *


SEC. 3201. RATE OF TAX.

  (a)  * * *
    [(b) Tier 2 Tax.--In addition to other taxes, there is 
hereby imposed on the income of each employee a tax equal to 
4.90 percent of the compensation received during any calendar 
year by such employee for services rendered by such employee.]
  (b) Tier 2 Tax.--
          (1) In general.--In addition to other taxes, there is 
        hereby imposed on the income of each employee a tax 
        equal to the applicable percentage of the compensation 
        received during any calendar year by such employee for 
        services rendered by such employee.
          (2) Applicable percentage.--For purposes of paragraph 
        (1), the term ``applicable percentage'' means--
                  (A) 4.90 percent in the case of compensation 
                received during 2001 or 2002, and
                  (B) in the case of compensation received 
                during any calendar year after 2002, the 
                percentage determined under section 3241 for 
                such calendar year.

           *       *       *       *       *       *       *


Subchapter B--Tax on Employee Representatives

           *       *       *       *       *       *       *


SEC. 3211. RATE OF TAX.

  [(a) Imposition of Taxes.--
          [(1) Tier 1 tax.--In addition to other taxes, there 
        is hereby imposed on the income of each employee 
        representative a tax equal to the applicable percentage 
        of the compensation received during any calendar year 
        by such employee representative for services rendered 
        by such employee representative. For purposes of the 
        preceding sentence, the term ``applicable percentage'' 
        means the percentage equal to the sum of the rates of 
        tax in effect under subsections (a) and (b) of section 
        3101 and subsections (a) and (b) of section 3111 for 
        the calendar year.
          [(2) Tier 2 tax.--In addition to other taxes, there 
        is hereby imposed on the income of each employee 
        representative a tax equal to the following percentage 
        of the compensation received during any calendar year 
        by such employee representatives for services rendered 
        by such employee representative:

     [In the case of compensation                                       
       received during:                               The rate shall be:
      1985....................................................     13.75
      1986 or thereafter......................................     14.75

          [(3) Cross reference.--For application of different 
        contribution bases with respect to the taxes imposed by 
        paragraphs (1) and (2), see section 3231(e)(2).
  [(b) In addition to other taxes, there is hereby imposed on 
the income of each employee representative a tax at a rate 
equal to the rate of excise tax imposed on every employer, 
provided for in section 3221(c), for each man-hour for which 
compensation is paid to him for services rendered as an 
employee representative.]
  (a) Tier 1 Tax.--In addition to other taxes, there is hereby 
imposed on the income of each employee representative a tax 
equal to the applicable percentage of the compensation received 
during any calendar year by such employee representative for 
services rendered by such employee representative. For purposes 
of the preceding sentence, the term ``applicable percentage'' 
means the percentage equal to the sum of the rates of tax in 
effect under subsections (a) and (b) of section 3101 and 
subsections (a) and (b) of section 3111 for the calendar year.
  (b) Tier 2 Tax.--
          (1) In general.--In addition to other taxes, there is 
        hereby imposed on the income of each employee 
        representative a tax equal to the applicable percentage 
        of the compensation received during any calendar year 
        by such employee representatives for services rendered 
        by such employee representative.
          (2) Applicable percentage.--For purposes of paragraph 
        (1), the term ``applicable percentage'' means--
                  (A) 14.75 percent in the case of compensation 
                received during 2001,
                  (B) 14.20 percent in the case of compensation 
                received during 2002, and
                  (C) in the case of compensation received 
                during any calendar year after 2002, the 
                percentage determined under section 3241 for 
                such calendar year.
  (c) Cross Reference.--

          For application of different contribution bases with respect 
        to the taxes imposed by subsections (a) and (b), see section 
        3231(e)(2).

           *       *       *       *       *       *       *


Subchapter C--Tax on Employers

           *       *       *       *       *       *       *


SEC. 3221. RATE OF TAX.

  (a)  * * *
  [(b) Tier 2 Tax.--In addition to other taxes, there is hereby 
imposed on every employer an excise tax, with respect to having 
individuals in his employ, equal to 16.10 percent of the 
compensation paid during any calendar year by such employer for 
services rendered to such employer.]
  (b) Tier 2 Tax.--
          (1) In general.--In addition to other taxes, there is 
        hereby imposed on every employer an excise tax, with 
        respect to havingindividuals in his employ, equal to 
the applicable percentage of the compensation paid during any calendar 
year by such employer for services rendered to such employer.
          (2) Applicable percentage.--For purposes of paragraph 
        (1), the term ``applicable percentage'' means--
                  (A) 15.6 percent in the case of compensation 
                paid during 2001,
                  (B) 14.2 percent in the case of compensation 
                paid during 2002, and
                  (C) in the case of compensation paid during 
                any calendar year after 2002, the percentage 
                determined under section 3241 for such calendar 
                year.
  [(c) In addition to other taxes, there is hereby imposed on 
every employer an excise tax, with respect to having 
individuals in his employ, for each man-hour for which 
compensation is paid by such employer for services rendered to 
him during any calendar quarter, at such rate as will make 
available sufficient funds to meet the obligation to pay 
supplemental annuities at the level provided under section 3(j) 
of the Railroad Retirement Act of 1937 as in effect on December 
31, 1974 and administrative expenses in connection therewith. 
For the purpose of this subsection, the Railroad Retirement 
Board is directed to determine what rate is required for each 
calendar quarter. The Railroad Retirement Board shall make the 
determinations provided for not later than fifteen days before 
each calendar quarter. As soon as practicable after each 
determination of the rate, as provided in this subsection, the 
Railroad Retirement Board shall publish a notice in the Federal 
Register, and shall advise all employers, employee 
representatives, and the Secretary, of the rate so determined. 
With respect to daily, weekly, or monthly rates of compensation 
such tax shall apply to the number of hours comprehended in the 
rate together with the number of overtime hours for which 
compensation in addition to the daily, weekly, or monthly rate 
is paid. With respect to compensation paid on a mileage or 
piecework basis such tax shall apply to the number of hours 
constituting the hourly equivalent of the compensation paid. 
Each employer of employees whose supplemental annuities are 
reduced pursuant to section 3(j)(2) of the Railroad Retirement 
Act of 1937 or section 2(h)(2) of the Railroad Retirement Act 
of 1974 shall be allowed as a credit against the tax imposed by 
this subsection an amount equivalent in each month to the 
aggregate amount of reductions in supplemental annuities 
accruing in such month to employees of such employer. If the 
credit so allowed to such an employer for any month exceeds the 
tax liability of such employer accruing under this subsection 
in such month, the excess may be carried forward for credit 
against such taxes accruing in subsequent months but the total 
credit allowed by this paragraph to an employer shall not 
exceed the total of the taxes on such employer imposed by this 
subsection. At the end of each calendar quarter the Railroad 
Retirement Board shall certify to the Secretary with respect to 
each such employer the amount of credit accruing to such 
employer under this paragraph during such quarter and shall 
notify such employer as to the amount so certified.
  [(d) Notwithstanding the provisions of subsection (c) of this 
section, the tax imposed by such subsection (c) shall not apply 
to an employer with respect to employees who are covered by a 
supplemental pension plan which is established pursuant to an 
agreement reached through collective bargaining between the 
employer and employees. There is hereby imposed on every such 
employer an excise tax equal to the amount of the supplemental 
annuity paid to each such employee under section 2(b) of the 
Railroad Retirement Act of 1974, plus a percentage thereof 
determined by the Railroad Retirement Board to be sufficient to 
cover the administrative costs attributable to such payments 
under section 2(b) of such Act.]

           *       *       *       *       *       *       *


Subchapter D--General Provisions

           *       *       *       *       *       *       *


SEC. 3231. DEFINITIONS.

  (a)  * * *

           *       *       *       *       *       *       *

  (e) Compensation.--For purposes of this chapter--
          (1)  * * *
          (2) Application of contribution bases.--
                  (A) Compensation in excess of applicable base 
                excluded.--
                          (i)  * * *

           *       *       *       *       *       *       *

                          (iii) Hospital insurance taxes.--
                        Clause (i) shall not apply to--
                                  (I) so much of the rate 
                                applicable under section 
                                3201(a) or 3221(a) as does not 
                                exceed the rate of tax in 
                                effect under section 3101(b), 
                                and
                                  (II) so much of the rate 
                                applicable under section 
                                [3211(a)(1)] 3211(a) as does 
                                not exceed the rate of tax in 
                                effect under section 1401(b).

           *       *       *       *       *       *       *

                  (B) Applicable Base.--
                          (i) Tier 2 taxes, etc.--For purposes 
                        of--
                                  (I) the taxes imposed by 
                                sections 3201(b), [3211(a)(2)] 
                                3211(b), and 3221(b), and

           *       *       *       *       *       *       *

          (4)(A) For purposes of applying sections 3201(a), 
        [3211(a)(1)] 3211(a), and 3221(a), in the case of 
        payments made to an employee or any of his dependents 
        on account of sickness or accident disability, clause 
        (i) of the second sentence of paragraph (1) shall 
        exclude from the term ``compensation'' only--
                  (i) payments which are received under a 
                workmen's compensation law, and
                  (ii) benefits received under the Railroad 
                Retirement Act of 1974.

           *       *       *       *       *       *       *


              Subchapter E--Tier 2 Tax Rate Determination

        Sec. 3241. Determination of tier 2 tax rate based on average 
                  account benefits ratio.

SEC. 3241. DETERMINATION OF TIER 2 TAX RATE BASED ON AVERAGE ACCOUNT 
                    BENEFITS RATIO.

  (a) In General.--For purposes of sections 3201(b), 3211(b), 
and 3221(b), the applicable percentage for any calendar year is 
the percentage determined in accordance with the table in 
subsection (b).
  (b) Tax Rate Schedule.--


------------------------------------------------------------------------
  Average account benefits ratio        Applicable
-----------------------------------   percentage for       Applicable
                                     sections 3211(b)    percentage for
    At least        But less than      and 3221(b)      section 3201(b)
------------------------------------------------------------------------
                            2.5                22.1                4.9
          2.5               3.0                18.1                4.9
          3.0               3.5                15.1                4.9
          3.5               4.0                14.1                4.9
          4.0               6.1                13.1                4.9
          6.1               6.5                12.6                4.4
          6.5               7.0                12.1                3.9
          7.0               7.5                11.6                3.4
          7.5               8.0                11.1                2.9
          8.0               8.5                10.1                1.9
          8.5               9.0                 9.1                0.9
          9.0                                   8.2                  0
------------------------------------------------------------------------


  (c) Definitions Related to Determination of Rates of Tax.--
          (1) Average account benefits ratio.--For purposes of 
        this section, the term ``average account benefits 
        ratio'' means, with respect to any calendar year, the 
        average determined by the Secretary of the account 
        benefits ratios for the 10 most recent fiscal years 
        ending before such calendar year. If the amount 
        determined under the preceding sentence is not a 
        multiple of 0.1, such amount shall be increased to the 
        next highest multiple of 0.1.
          (2) Account benefits ratio.--For purposes of this 
        section, the term ``account benefits ratio'' means, 
        with respect to any fiscal year, the amount determined 
        by the Railroad Retirement Board by dividing the fair 
        market value of the assets in the Railroad Retirement 
        Account and of the Railroad Retirement Investment Trust 
        (and for years before 2001, the Social Security 
        Equivalent Benefits Account) as of the close of such 
        fiscal year by the total benefits and administrative 
        expenses paid from the Railroad Retirement Account and 
        the Railroad Retirement Investment Trust during such 
        fiscal year.
  (d) Notice.--No later than December 1 of each calendar year, 
the Secretary shall publish a notice in the Federal Register of 
the rates of tax determined under this section which are 
applicable for the following calendar year.

           *       *       *       *       *       *       *