[Congressional Record (Bound Edition), Volume 147 (2001), Part 17]
[Senate]
[Pages 23692-23693]
[From the U.S. Government Publishing Office, www.gpo.gov]


[[Page 23692]]

                       RAILROAD RETIREMENT REFORM

  Mr. HATCH. Mr. President, I rise today in strong support of the 
Railroad Retirement and Survivors' Improvement Act. This is good, 
common sense


legislation that will lower the program's costs and provide greatly 
improved benefits to thousands of Utahns and hundreds of thousands of 
Americans who are spending or have spent their working careers in the 
railroad industry.
  With an impressive 73 Members joining Senator Baucus and me as 
cosponsors of this bill, and a vote on passage of 384-to-33 in the 
House earlier this year, this legislation enjoys tremendous support of 
our colleagues in both Chambers and on both sides of the aisle.
  Other supporters of this bill have already spoken at length about the 
features of the bill, so I would like to focus my remarks today on 
responding to some of the criticisms made last week by a few of our 
colleagues who oppose this legislation.
  Specifically, during last week's debate on this bill, my colleague 
and friend, the senior Senator from Texas, spoke at length about what 
he refers to as the ``pilfering'' of the Railroad Retirement Account 
that he alleged would take place under this bill. While I agree 
wholeheartedly with the Senator on some of his statements, I could not 
disagree more with his suggestion that this legislation is some kind of 
underhanded attempt at wrongdoing by the retirees, workers, and 
employers in this industry.
  Let me first make clear that I agree with the Senator in his 
conviction that vast improvements would be made by changing the rules 
for the investment of Railroad Retirement assets. Because of the long-
standing requirement that those assets can only be invested in 
Government securities, the railroad industry's retirement plan has been 
far less efficient than those in other industries.
  As a result, the rail industry's contributions to its pension plan 
are far higher than in other industries. This legislation would 
eliminate that limitation and allow the investment of assets in the 
stock market, as well as in Government securities. Senator Gramm has 
stated that this would be a good change, and I am of the same mind. I 
agree with him on that.
  I am also in full agreement with the Senator when he said that the 
assets of the Railroad Retirement system are the pension contributions 
of rail workers, retirees, and employers, as well as the earnings on 
those contributions. However, I am perplexed when Senator Gramm alleges 
that, under this bill, these contributors would be ``pilfering'' their 
own contributions.
  I also take exception to the suggestion that the use of the increased 
investment returns projected under this bill is inappropriate. Because 
Railroad Retirement account balances will be less under this 
legislation than they would under current law, even with greater 
investment returns, Senator Gramm concludes that there must be 
``pilfering'' going on. This analysis is highly misleading.
  It assumes that the all balances projected under current law are 
necessary for the fiscal health of the system, and that anything less 
will subject the system to great peril. The reality is that, while 
account balances will decrease for a time under the new legislation, 
the Railroad Retirement Account is projected by the Railroad Retirement 
actuary to remain solvent for the next 75 years.
  Last Friday, Senator Gramm used a chart that helped tell the story 
that he wanted to tell. It was a very nice chart, but the chart was 
somewhat truncated and failed to give the full picture. Let's look at 
why reducing the long term build up is neither ``pilfering'' or bad 
business economics.
  As you can see, this is the trust balance that will remain strong 
under the Railroad Retirement program.
  Under current law, the Railroad Retirement Board actuary projects 
that the fund balance by 2074--this red line on the top--will grow to 
$702.8 billion as of 2074 under Employment Assumption II. Benefit 
obligations for that year would be approximately $15 billion. This is a 
ratio of trust fund reserves to benefits of almost 47 years of 
benefits. No wonder the industry wants to develop a more rational 
funding approach.
  Let me point you to chart No. 2.
  Under Employment Assumption I, the more optimistic of the two 
assumptions most typically used to measure the system, the point gets 
even more dramatic. In this case, the actuary projects that the fund 
balance by 2074 will grow to $1.5 trillion. That is trillion with a 
``T.''
  Benefit obligations under this more optimistic employment assumption 
would increase, of course--more workers equals more retirees. The 
benefit obligation grows to approximately $21 billion. Under this 
employment assumption, the ratio of reserves to benefits expands to 
more than 71 times. Again, it is no surprise why the industry is 
working to develop a more rationale funding approach.
  As you can see by the blue line, if we pass this legislation, this 
would be the balance under the current legislation--the balance that we 
would be getting under this compared to current law, which means the 
retirees would not be getting nearly the benefit, nor will the industry 
be getting nearly the benefit than they could with a more rational, 
meaningful approach towards a pension.
  Now, why would these balances be adequate but lower than now 
projected, if we passed this bill? Is it because of ``pilfering?'' No, 
it is because the bill provides for modest, judicious tax cuts and 
overdue improvements in retiree benefits.
  Under current law, the rail industry contributes three times more to 
Railroad Retirement than employers in other industries contribute to 
retirement programs. Under current law, widows of retirees have their 
benefits reduced by two-thirds upon the death of their spouses. Under 
current law, rail employees must wait 10 years to vest rather than the 
usual 5 or even 3 years common in other industries.
  This legislation would simply reduce payroll taxes on rail employers 
to bring its contributions more in line with other industries--although 
at more than 13 percent it would still be much higher than the funding 
levels of other industries--and make improvements in vesting, early 
retirement and widows' benefits.
  Under this bill, unnecessary, enormous surpluses that would occur 
under current law, indicated by the red line, would be avoided, while 
maintaining more than adequate reserves in the system, which would be 
what this bill will do while taking care of widows, among others. The 
industry has long been recognized as the most capital intensive 
component of the industrial segment of the U.S. economy, according to 
studies done by sources ranging from Fortune Magazine to the Department 
of Commerce. Under this legislation, the industry would be better able 
to deploy its scarce investment capital.
  Senator Gramm and others have repeatedly asserted that the Railroad 
Retirement system will run out of money if this bill is adopted and the 
Government will have to make up the shortfall. As I mentioned a moment 
ago, the Railroad Retirement actuary has reviewed this bill and found 
that under it, as under current law, the system is solvent over the 
next 75 years under both Assumption I and Assumption II. The 
assumptions behind this projection were accepted by the CBO which used 
them for its analysis.
  Moreover, the bill provides, for the first time, an automatic tax 
schedule that will raise taxes on rail employers if pension fund 
reserves drop below 4 years of benefits. This will require no action by 
Congress.
  Senator Gramm and his staff must have had a lot of fun calculating 
what tax rates might be at some point in the future to get the fund 
balances back to current-law levels under the bill. The reality is, 
however, we should not be trying to build up reserves that are between 
47 and 71 times annual benefit obligation outlays. That makes no sense.
  But Senator Gramm declares that the industry will try to avoid higher 
tax rates that may even be triggered by the formula and, as a result, 
the Government will have to step in. In this regard, I think past 
history is instructive. In the past, when financial problems have 
arisen, Congress has chosen to raise taxes and reduce benefits,

[[Page 23693]]

rather than to provide bailouts for this industry.
  Thus, even if Senator Gramm's doomsday scenario comes true, it is the 
plan participants who are likely to pay, not the Federal Government. 
The industry knows this as well. This is why the railroads want the 
opportunity to manage this system, along with taking on more 
responsibility.
  I also want to respond to one other misunderstanding that has arisen 
in this debate--that by lowering the retirement age for Railroad 
Retirement to age 60, the bill gives railroad workers a benefit no one 
else has, and that this benefit conflicts with the increase in the 
Social Security eligibility age.
  First, the earlier retirement age applies only to workers who have 30 
years of service in the rail industry. Second, the normal retirement 
age for Tier 1, the Social Security counterpart of Railroad Retirement, 
is not affected by this bill. It will rise to age 67 just as the Social 
Security retirement age will. Third, paying the cost of Social Security 
for early retirees until they reach normal Social Security retirement 
age is a feature found in private sector pension plans.
  These are known as ``bridge'' plans. Like these plans, the private 
portion of Railroad Retirement--Tier 2--pays the entire cost of this 
early retirement option, just as it currently does for workers with 30 
years of service at age 62.
  Keep in mind this is a dangerous industry in which to work. It is not 
uncommon for employees in the railroad industry who are working on the 
line to never be able to get their full 30 years in because of the 
dangers and the accidents that occur as a result of this industry. It 
is a tough industry. I used to represent railroad workers in some of 
these cases. What happened to some of them was horrendous. Many of them 
died trying to do their job. Others were mutilated. Legs were cut off, 
and arms were lost. Families were devastated.
  These things do happen. It is not comparable to most other pension-
backed industries.
  In conclusion, you may call this an opportunity for the rail industry 
to invest capital in infrastructure rather than excessive account 
surpluses. You may call it an opportunity to improve benefits for 
widows and for retirees who work 30 years in work that is often arduous 
and dangerous. You may call it an opportunity to bring Railroad 
Retirement investment practices into the modern era. But don't call it 
``pilfering.''
  I know a lot about this industry. I know what a difficult industry it 
is. I know there are things that are wrong with the industry. I know 
there are things such as feather-bedding in this industry that have 
existed for a long time. But there are also a lot of loyal, decent, 
honorable people working in these dangerous jobs to keep America's 
goods and services moving across this country.
  I can't imagine why we would not want to help these widows who have 
such a drastic automatic reduction in their benefits once their 
husbands pass on. I think in most cases the husband is going to 
predecease the wife.
  That is part of what we are trying to do here. Like everything else, 
nothing is perfect around here. And this bill is not perfect. But it is 
a rational and reasonable attempt to allow this industry to invest in 
capital infrastructure so that it can keep going and so that widows and 
pensioners can be taken care of.
  This is an industry that we have to keep going. An awful lot of bulk 
transfers occur on our railroads in this country. We know there is 
going to have to be more investment as we upgrade high-speed lines and 
other effective approaches to transport materials, manufactured 
products, and other things throughout our country.
  This is a great industry. It is an important industry. The people who 
work in it deserve the best we can give them. I do not see the 
Government paying for the liability that could arise under the most 
drastic pessimistic scenarios, as have been painted by some in this 
Chamber: Not paying for it themselves. And I believe Congress will see 
that that occurs. It is up to the industry to make sure they never have 
to do more than what is reasonable and rational under the circumstances 
by making sure that this pension program is viable, that it works, and 
that it takes care of these people who need to be taken care of. Mr. 
President, I yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from North Dakota.
  Mr. DORGAN. Mr. President, are we in morning business?
  The ACTING PRESIDENT pro tempore. We are in morning business.

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