[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1140 Engrossed in House (EH)]

  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
107th CONGRESS
  1st Session
                                H. R. 1140

_______________________________________________________________________

                                 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.

            Passed the House of Representatives July 31, 2001.

            Attest:

                                                                 Clerk.
107th CONGRESS

  1st Session

                               H. R. 1140

_______________________________________________________________________

                                 AN ACT

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