[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 10 Enrolled Bill (ENR)]

        H.R.10

                      One Hundred Seventh Congress

                                 of the

                        United States of America


                          AT THE FIRST SESSION

         Begun and held at the City of Washington on Wednesday,
             the third day of January, two thousand and one


                                 An Act


 
  To modernize the financing of the railroad retirement system and to 
                                provide 
            enhanced benefits to employees and beneficiaries.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Railroad 
Retirement and Survivors' Improvement Act of 2001''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:
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 National 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 (45 U.S.C. 231c(g)) 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 section 202(e)(7), 202(f)(2), or 
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) In general.--The amendment made by this section shall take 
    effect on the first day of the first month that begins more than 30 
    days after enactment, and shall apply to annuity amounts accruing 
    for months after the effective date in the case of annuities 
    awarded--
            (A) on or after that date; and
            (B) before that date, but only if the annuity amount under 
        section 4(g) of the Railroad Retirement Act of 1974 (45 U.S.C. 
        231c(g)) was computed under such section, as amended by the 
        Omnibus Budget Reconciliation Act of 1981 (Public Law 97-35; 95 
        Stat. 357).
        (2) Special rule for annuities awarded before the effective 
    date.--In applying the amendment made by this section to annuities 
    awarded before the effective date, the calculation of the initial 
    minimum amount under new section 4(g)(10)(ii) of the Railroad 
    Retirement Act of 1974 (45 U.S.C. 231c(g)(10)(ii)), as added by 
    subsection (a), shall be made as of the date of the 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 (45 U.S.C. 231b(a)(2)) is amended by inserting after 
``(2)'' the following new sentence: ``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 (45 U.S.C. 231c(a)(2)) 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 of 1974 (45 U.S.C. 231b(a)(3), 231c(a)(3), 
and 231c(a)(4)) 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, 2002.
        (2) Exception.--The amount of the annuity provided for a spouse 
    under section 4(a) of the Railroad Retirement Act of 1974 (45 
    U.S.C. 231c(a)) shall be computed under section 4(a)(3) of such 
    Act, as in effect on December 31, 2001, if the annuity amount 
    provided under section 3(a) of such Act (45 U.S.C. 231b(a)) for the 
    individual on whose employment record the spouse annuity is based 
    was computed under section 3(a)(3) of such Act, as in effect on 
    December 31, 2001.

SEC. 103. VESTING REQUIREMENT.

    (a) Certain Annuities for Individuals.--Section 2(a) of the 
Railroad Retirement Act of 1974 (45 U.S.C. 231a(a)) 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 new subdivision:
    ``(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 (45 U.S.C. 231b(a)), as amended by 
section 102 of this Act, is further amended 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 (45 U.S.C. 231a(d)(1)) 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 (45 U.S.C. 231a) is amended by adding at the end 
the following new subsection:
    ``(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 title II of the Social Security Act on the basis of 
the individual's employment record under both this Act and title II of 
the Social Security Act.''.
    (e) Computation Rule for Spouses' Annuities.--Section 4(a) of the 
Railroad Retirement Act of 1974 (45 U.S.C. 231c(a)), 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 (45 U.S.C. 231d(b)) is amended by striking the 
second sentence and inserting the following new sentence: ``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 (45 U.S.C. 231q(2)) 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 appears; 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 (45 U.S.C. 231r) 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 (45 
    U.S.C. 231e(1)) 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)(A) of the Railroad Retirement Act of 1974 
    (45 U.S.C. 231f(b)(2)(A)) 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 (42 U.S.C. 
    405(i)) is amended by inserting ``(or five or more years of 
    service, all of which accrues after December 31, 1995)'' after 
    ``ten years of service''.
        (4) Section 6(b)(2) of the Railroad Retirement Act of 1974 (45 
    U.S.C. 231e(b)(2)) is amended by inserting ``(or five or more years 
    of service, all of which accrues after December 31, 1995)'' after 
    ``ten years of service'' the second place it appears.
    (j) Effective Date.--The amendments made by this section shall take 
effect on January 1, 2002.

SEC. 104. REPEAL OF RAILROAD RETIREMENT MAXIMUM.

    (a) Employee Annuities.--
        (1) In general.--Section 3(f) of the Railroad Retirement Act of 
    1974 (45 U.S.C. 231b(f)) is amended--
            (A) by striking subdivision (1); and
            (B) by redesignating subdivisions (2) and (3) as 
        subdivisions (1) and (2), respectively.
        (2) Conforming amendments.--
            (A) The first sentence of section 3(f)(1) of the Railroad 
        Retirement Act of 1974 (45 U.S.C. 231b(f)(1)), as redesignated 
        by paragraph (1)(B), is amended by striking ``, without regard 
        to the provisions of subdivision (1) of this subsection,''.
            (B) Paragraphs (i) and (ii) of section 7(d)(2) of the 
        Railroad Retirement Act of 1974 (45 U.S.C. 231f(d)(2)) are each 
        amended by striking ``section 3(f)(3)'' and inserting ``section 
        3(f)(2)''.
    (b) Spouse and Survivor Annuities.--Section 4 of the Railroad 
Retirement Act of 1974 (45 U.S.C. 231c) is amended by striking 
subsection (c).
    (c) Effective Date.--The amendments made by this section shall take 
effect on January 1, 2002, and shall apply to annuity amounts accruing 
for months after December 2001.

SEC. 105. INVESTMENT OF RAILROAD RETIREMENT ASSETS.

    (a) Establishment of National Railroad Retirement Investment 
Trust.--Section 15 of the Railroad Retirement Act of 1974 (45 U.S.C. 
231n) is amended by inserting after subsection (i) the following new 
subsection:
    ``(j) National Railroad Retirement Investment Trust.--
        ``(1) Establishment.--The National Railroad Retirement 
    Investment Trust (hereinafter in this subsection referred to as the 
    `Trust') is hereby established as a trust domiciled 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. The Trust shall manage and invest its assets in the 
    manner set forth in this subsection.
        ``(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.--
                ``(i) Membership.--The Trust shall have a Board of 
            Trustees, consisting of 7 members. Three shall represent 
            the interests of labor, 3 shall represent the interests of 
            management, and 1 shall be an independent Trustee. The 
            members of the Board of Trustees shall not be considered 
            officers or employees of the Government of the United 
            States.
                ``(ii) Selection.--

                    ``(I) The 3 members representing the interests of 
                labor shall be selected by the joint recommendation of 
                labor organizations, national in scope, organized in 
                accordance with section 2 of the Railway Labor Act, and 
                representing at least \2/3\ of all active employees, 
                represented by such national labor organizations, 
                covered under this Act.
                    ``(II) The 3 members representing the interests of 
                management shall be selected by the joint 
                recommendation of carriers as defined in section 1 of 
                the Railway Labor Act employing at least \2/3\ of all 
                active employees covered under this Act.
                    ``(III) The independent member shall be selected by 
                a majority of the other 6 members of the Board of 
                Trustees.

            A member of the Board of Trustees may be removed in the 
            same manner and by the same constituency that selected that 
            member.
                ``(iii) Dispute resolution.--In the event that the 
            parties specified in subclause (I), (II), or (III) of the 
            previous clause cannot agree on the selection of Trustees 
            within 60 days of the date of enactment or 60 days from any 
            subsequent date that a position of the Board of Trustees 
            becomes vacant, an impartial umpire to decide such dispute 
            shall, on the petition of a party to the dispute, be 
            appointed by the District Court of the United States for 
            the District of Columbia.
            ``(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 
        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. The Trustee initially selected pursuant to 
        clause (ii)(III) shall be appointed to 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 Trust in a manner consistent with such investment 
        guidelines;
            ``(C) invest assets in the Trust, pursuant to the policies 
        adopted in subparagraph (A);
            ``(D) pay administrative expenses of the Trust from the 
        assets in the Trust; and
            ``(E) transfer money to the disbursing agent or as 
        otherwise provided in section 7(b)(4), to pay benefits payable 
        under this Act from the assets of the Trust.
        ``(5) Reporting requirements and fiduciary standards.--The 
    following reporting requirements and fiduciary standards shall 
    apply with respect to the Trust:
            ``(A) Duties of the board of trustees.--The Trust and each 
        member of the Board of Trustees shall discharge their duties 
        (including the voting of proxies) with respect to the assets of 
        the Trust 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 and to avoid disproportionate 
            influence over a particular industry or firm, 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 Trust 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 Trust on behalf 
            of a party (or represent a party) whose interests are 
            adverse to the interests of the Trust, 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 Trust.
            ``(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 Trust (hereafter in this 
        subsection referred to as `Trust official') shall be bonded. 
        Such bond shall provide protection to the Trust against loss by 
        reason of acts of fraud or dishonesty on the part of any Trust 
        official, directly or through the connivance of others, and 
        shall be 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 Trust 
            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 Trust.
                ``(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 
                clause (i); and
                    ``(VI) any other comments and information necessary 
                to inform the Congress about the operations and 
                financial condition of the Trust.

                ``(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 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, 
    including the Railroad Retirement Board, 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.
        ``(8) Funding.--The expenses of the Trust and the Board of 
    Trustees incurred under this subsection shall be paid from the 
    Trust.''.
    (b) Conforming and Technical Amendments Governing Investments.--
Section 15(e) of the Railroad Retirement Act of 1974 (45 U.S.C. 
231n(e)) is amended--
        (1) 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 National 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) Means of Financing.--For all purposes of the Congressional 
Budget Act of 1974, the Balanced Budget and Emergency Deficit Control 
Act of 1985, and chapter 11 of title 31, United States Code, and 
notwithstanding section 20 of the Office of Management and Budget 
Circular No. A-11, the purchase or sale of non-Federal assets (other 
than gains or losses from such transactions) by the National Railroad 
Retirement Investment Trust shall be treated as a means of financing.
    (d) Effective Date.--The amendments made by this section shall take 
effect on the first day of the month that begins more than 30 days 
after enactment.

SEC. 106. ELIMINATION OF SUPPLEMENTAL ANNUITY ACCOUNT.

    (a) Source of Payments.--Section 7(c)(1) of the Railroad Retirement 
Act of 1974 (45 U.S.C. 231f(c)(1)) 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 (45 U.S.C. 231n(c)) is repealed.
    (c) Amendment to Railroad Retirement Account.--Section 15(a) of the 
Railroad Retirement Act of 1974 (45 U.S.C. 231n(a)) 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) Transfer.--
        (1) Determination.--As soon as possible after December 31, 
    2001, the Railroad Retirement Board shall--
            (A) determine the amount of funds in the Railroad 
        Retirement Supplemental Account under section 15(c) of the 
        Railroad Retirement Act of 1974 (45 U.S.C. 231n(c)) as of the 
        date of such determination; and
            (B) direct the Secretary of the Treasury to transfer such 
        funds to the National Railroad Retirement Investment Trust 
        under section 15(j) of such Act (as added by section 105).
        (2) Transfer by the secretary of the treasury.--The Secretary 
    of the Treasury shall make the transfer described in paragraph (1).
    (e) Effective Date.--
        (1) In general.--Subject to paragraph (2), the amendments made 
    by subsections (a), (b), and (c) shall take effect January 1, 2002.
        (2) Account in existence until transfer made.--The Railroad 
    Retirement Supplemental Account under section 15(c) of the Railroad 
    Retirement Act of 1974 (45 U.S.C. 231n(c)) shall continue to exist 
    until the date that the Secretary of the Treasury makes the 
    transfer described in subsection (d)(2).

SEC. 107. TRANSFER AUTHORITY REVISIONS.

    (a) Railroad Retirement Account.--Section 15 of the Railroad 
Retirement Act of 1974 (45 U.S.C. 231n) is amended by adding after 
subsection (j) the following new subsection:
    ``(k) Transfers to the Trust.--The Board shall, upon establishment 
of the National Railroad Retirement Investment Trust 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 National Railroad Retirement Investment Trust. The Secretary shall 
make that transfer.''.
    (b) Transfers From the National Railroad Retirement Investment 
Trust.--Section 15 of the Railroad Retirement Act of 1974 (45 U.S.C. 
231n), as amended by subsection (a), is further amended by adding after 
subsection (k) the following new subsection:
    ``(l) National Railroad Retirement Investment Trust.--The National 
Railroad Retirement Investment Trust shall from time to time transfer 
to the disbursing agent described in section 7(b)(4) or as otherwise 
directed by the Railroad Retirement Board pursuant to 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.--
        (1) Transfers to trust.--Section 15A(d)(2) of the Railroad 
    Retirement Act of 1974 (45 U.S.C. 231n-1(d)(2)) is amended to read 
    as follows:
    ``(2) Upon establishment of the National Railroad Retirement 
Investment Trust 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 and administrative expenses required to 
be paid from that Account to the National Railroad Retirement 
Investment Trust, and the Secretary shall make that transfer. Any 
balance transferred under this paragraph shall be used by the National 
Railroad Retirement Investment 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 (45 U.S.C. 231n-1(c)(1)) is amended 
    by adding at the end the following new sentence: ``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 (45 U.S.C. 231n-1(d)(1)) 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 (45 U.S.C. 231n(d)(1)) is amended by 
adding at the end the following new sentence: ``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 (45 U.S.C. 
231f(b)(4)) is amended to read as follows:
    ``(4)(A) The Railroad Retirement Board, after consultation with the 
Board of Trustees of the National Railroad Retirement Investment 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. Pending the taking effect of 
that arrangement, benefits shall be paid as under the law in effect 
prior to the enactment of the Railroad Retirement and Survivors' 
Improvement Act of 2001.
    ``(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 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 National Railroad 
    Retirement Investment Trust the amounts required to be transferred 
    from the National 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 (45 U.S.C. 231f(c)(1)) 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 National Railroad Retirement 
    Investment Trust 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 sections 15(k) and 15A(d)(2) of the Railroad Retirement Act of 
1974, as amended by subsections (a) and (c), respectively, the Railroad 
Retirement Board shall consult with the Secretary of the Treasury to 
design an appropriate method to transfer obligations held as of the 
date of enactment of this Act or to convert such obligations to cash at 
the discretion of the Railroad Retirement Board prior to transfer. The 
National Railroad Retirement Investment 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 (45 U.S.C. 231u(a)(1)) is amended--
        (1) by inserting after the first sentence the following new 
    sentence: ``On or before May 1 of each year beginning in 2003, 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 (45 U.S.C. 
231 et seq.) is amended by adding at the end the following new section:


        ``computation and certification of account benefit ratios

    ``Sec. 23. (a) Initial Computation and Certification.--On or before 
November 1, 2003, 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 of the Treasury.
    ``(b) Computations and Certifications After 2003.--On or before 
November 1 of each year after 2003, 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 of the Treasury.
    ``(c) Definition.--As used in this section, the term `account 
benefits 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 NATIONAL RAILROAD RETIREMENT 
              INVESTMENT TRUST.

    Subsection (c) of section 501 is amended by adding at the end the 
following new paragraph:
        ``(28) The National 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) and by redesignating subsection (e) as 
subsection (c).
    (c) Effective Date.--The amendments made by this section shall 
apply to calendar years beginning after December 31, 2001.

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 
        2002,
            ``(B) 14.2 percent in the case of compensation paid during 
        2003, and
            ``(C) in the case of compensation paid during any calendar 
        year after 2003, 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 2002,
            ``(B) 14.20 percent in the case of compensation received 
        during 2003, and
            ``(C) in the case of compensation received during any 
        calendar year after 2003, 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 2002 or 2003, and
            ``(B) in the case of compensation received during any 
        calendar year after 2003, the percentage determined under 
        section 3241 for such calendar year.''.
    (d) Determination of Rate.--Chapter 22 is amended by adding at the 
end 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 National Railroad Retirement 
    Investment Trust (and for years before 2002, 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 National 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 
    ``3211(a)(2)'' and inserting ``3211(b)''.
        (3) Paragraphs (2)(A)(iii)(II) and (4)(A) of section 3231(e) 
    are 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, 2001.

                               Speaker of the House of Representatives.

                            Vice President of the United States and    
                                               President of the Senate.