TITLE: Railroad Retirement Board:� Status of Amounts Transferred Pursuant to, B-287158, October 10, 2002
BNUMBER: B-287158
DATE: October 10, 2002
**********************************************************************
Railroad Retirement Board: Status of Amounts Transferred Pursuant to, B-287158,
October 10, 2002
Decision
Matter of: Railroad Retirement Board: Status of Amounts Transferred
Pursuant to Section 401 of the Railroad Retirement Solvency Act of 1983
File: B-287158
Date: October 10, 2002
DIGEST
Prior to 1974, individuals with sufficient earnings under both the
railroad retirement and social security programs could qualify for
benefits under both programs. The attendant *windfalls* were benefits in
excess of what the individuals would have received had they worked
exclusively within one system. After 1974, Congress intended that the
costs of these windfall payments be borne by the general fund and not
by the railroad retirement system. Payments authorized under section 401
of the Railroad Retirement Solvency Act of 1983 were intended to
recompense the railroad retirement system for having covered the
appropriation shortfall in paying the windfall benefits between 1974 and
1981. The transferred amounts, although called *loans,* were to be repaid
only to the extent that funds were appropriated for that purpose, which
has not been done. Since it was not intended that the Railroad Retirement
Board repay the transferred amounts from its accounts, it is not under any
legal obligation regarding these funds absent an appropriation for such
purpose.
DECISION
The Bureau of the Public Debt, Department of the Treasury (Treasury)
requests our legal opinion concerning the treatment of $2.1 billion
transferred from the general fund to the Railroad Retirement Board (RRB)
in three installments pursuant to section 401 of the Railroad Retirement
Solvency Act of 1983 (the 1983 Act), 45 U.S.C. S: 231n. Under the 1983
Act, the transferred amounts, called *loans,* would be *repaid to the
general fund to the extent sums are appropriated for the purpose.*
45 U.S.C. S: 231n(d)(6). In the 16 years since the last amount was
transferred, the Congress has not appropriated funds for the purpose of
repayment of the amounts transferred.
Treasury maintains that the transferred amounts are loans to RRB that RRB
must repay to the Treasury's general fund. Treasury insists that the RRB
should either perfect the loans by requesting a repayment appropriation or
request the Congress to forgive the loans. RRB considers the amounts not
loans but payments to RRB for shortfalls in its appropriations for certain
retirement benefits paid out of the Railroad Retirement Account between
1974 and 1981. RRB asserts that it is under no obligation to repay the
amounts, nor does it have a legal obligation to take either of the actions
Treasury has proposed. For the reasons stated below, we agree with RRB's
position regarding these payments.
BACKGROUND
The RRB is an independent agency within the executive branch of the
federal government charged with administering retirement-survivor and
unemployment-sickness benefit programs for railroad workers and their
families. Railroad Retirement Act of 1974 (the 1974 Act), 45 U.S.C.
S:S:231-231u, 351-369 (1988); see generally, 69 Comp. Gen. 483, 484
(1990). Initially, as established in the 1930s, the railroad program was
financed by contributions from rail employers and employees. However,
numerous subsequent legislative changes increased federal financial
involvement. See GAO, Railroad Retirement, Federal Financial Involvement
(GAO/HRD 86-88, May 9, 1988, at 10-16).
Under laws in effect prior to 1975, individuals with sufficient earnings
under both the railroad retirement and social security programs could
qualify for both railroad retirement and social security benefits, termed
*dual benefits.* The attendant so-called *windfalls* were benefits in
excess of what individuals would have received had they worked exclusively
within only one system. These dual benefits' windfalls were paid out of
and seriously eroded the financial viability of the railroad retirement
trust fund for years. Id. at 14. See also Givens v. Railroad Retirement
Board, 720 F.2d 196, 198 (1983); H.R. Rep. No. 98-30 Part I, 98th Cong.,
1st Sess. 19-20 (March 9, 1983), reprinted in 1983 U.S.C.C.A.N. 729. In
response, the 1974 Act restructured the railroad retirement system by
eliminating future accruals of dual benefits except for persons vested or
*grandfathered in* as of December 31, 1974.[1] The 1974 Act also
authorized annual appropriations to fund this phase-out of dual benefits
over a 25-year period (i.e., for fiscal years 1976-2000, then estimated at
around $250 million annually).[2]
However, prior to fiscal year 1982, appropriations were not adequate to
fully fund the total amount of vested dual benefit/windfall payments.
Since the payment of these benefits was not limited to the amounts
appropriated, the RRB continued to pay the windfall benefits from the
railroad retirement account, which strained that account and contributed
to a financial crisis in the system. This situation was stopped in fiscal
year 1982, when 1981 amendments to the 1974 Act provided that dual
benefits were to be paid from a separate dual benefits payments account
and vested dual benefits were to be reduced so as not to exceed the annual
appropriation.[3] However, there was no provision for compensating the
Railroad Retirement Account for having absorbed the shortfall in
appropriations for prior years. The financial state of the railroad
retirement system continued to deteriorate.[4]
To compensate the RRB for the shortfall, the 1983 Act provided for funding
the shortfall in three installments under Title IV, section 401, which
amended section 15(d) of the 1974 Act by adding at the end a new
subdivision as follows:
*(2) The Secretary of the Treasury*
*(i) shall transfer from the general fund as a loan to the
[Railroad Retirement] Board on January 1, 1984, one-third of the special
amount described in subdivision (3) of this subsection;
*(ii) shall transfer from the general fund as a loan to the
Board on January 1, 1985, one-third of the special amount described in
subdivision (3) of this subsection, plus an amount equal to the interest
that one-third would have earned had it been in the Railroad Retirement
Account since January 1, 1984; and
*(iii) shall transfer from the general fund as a loan to the
Board on January 1, 1986, the final one-third of the special amount
described in subdivision (3) of this subsection, plus an amount equal to
the interest that one-third would have earned had it been in the Railroad
Retirement Account since January 1, 1984.
*(3) The special amount referred to in subdivision (2) of this subsection
is the amount which, as of January 1, 1984, would place the Railroad
Retirement Account in the same position it would have been on that date if
no annuity amounts had been paid during the period beginning January 1,
1975 and ending September 30, 1981, . . . and no sums had been
appropriated as authorized in section 15(d) of this Act.
* * *
* *
*(6) The amounts transferred as loans under subdivision (2) of this
subsection shall be repaid to the general fund to the extent sums are
appropriated for that purpose, and there are hereby authorized to be
appropriated, in addition to any other sums authorized to be appropriated
for the purposes of this Act and from any sums in the Treasury not
otherwise appropriated, such sums as may be necessary to make such
repayments.*
45 U.S.C. S: 231n(d)(2), (3) and (6) (Emphasis added.). Pursuant to these
provisions in the 1983 Act, Treasury transferred $628,800,000,
$706,400,000, and $793,200,000 from the general fund to the RRB on January
3, 1984, January 2, 1985, and January 2, 1986, respectively, for a total
of $2,128,400,000. In the 16 years since the last amount was transferred,
the Congress has not appropriated funds to RRB for repayment of the
amounts transferred.
ISSUE
The question at issue here is the current status of the transferred
funds. Treasury's position[5] that the transferred amounts at issue are
loans to be repaid to the general fund is based primarily on the language
of the 1983 Act, quoted above, which uses the word *loan(s)* several
times.[6] Treasury asserts that its position is also supported by the
legislative history, citing to the House Report, H.R. Rep. No. 98-30 Part
I, supra at 29, which states under the heading *Borrowing authority for
past dual benefit shortfall* that *[e]ach installment would be borrowed
from the Treasury on the appropriate date, with the amounts borrowed to be
repaid upon appropriations for that purpose.* Treasury argues that the
use of the word *borrowed,* defined as having *receive[d] money with the
understanding or agreement that it must be repaid,* together with *loan*
indicates the intention that the amounts were meant to be used temporarily
and then returned to the general fund. Chief Counsel Memorandum, October
26, 1999.
In Treasury's view, the fact that repayment funds for the loans have not
been appropriated cannot be viewed as a repeal or invalidation of the
RRB's obligation to repay the loaned amounts. Chief Counsel Memorandum,
October 26, 1999. Consequently, Treasury maintains that the RRB is
required to perfect the 1983 Act by requesting a specific appropriation to
cover the amount of the transactions so that repayment of the loans can be
made. In this regard, Treasury contends that the situation here is
similar to that in a 1984 decision in which our Office determined that,
where the Tax Equity and Fiscal Responsibility Act of 1982 authorized
litigation cost awards to taxpayers who prevailed in U.S. Tax Court, and
the Congress did not appropriate funds for this purpose, the relevant
agency should request specific appropriations to cover the litigation cost
awards. 63 Comp. Gen. 470 (1984). Alternatively, Treasury asserts that
the RRB could request congressional forgiveness of the debt, and thus be
relieved of the obligation to repay.[7]
Contrary to Treasury's position, the RRB's position is that the 1983 Act
authorized funding to repay the railroad retirement account for the amount
previously expended (plus interest) based on the shortfall in
appropriations between 1974 and 1981 for the vested dual benefits/windfall
payments.[8] The RRB interprets the 1983 Act as not imposing any
obligation on the Railroad Retirement Account to repay the transferred
amounts. The 1983 Act also does not impose any obligation on the RRB to
request repayment appropriations from general revenues or on Congress to
appropriate repayment funds from general revenues. Further, the RRB is of
the opinion that it does not have a legal obligation to request
forgiveness of the debt. Finally, the RRB asserts that, since the money
to repay the loans to general revenues would be appropriated from general
revenues, repayment of the transferred amounts would not serve any
practical financial purpose.
While Treasury and RRB staff have conversed and corresponded on this issue
since February 1999, they have not come to a resolution. This matter is
of concern to Treasury because Treasury shows the payment as a loan
receivable on its financial statement, but the RRB does not show a
corresponding loan payable on its statement. Therefore, no interagency
elimination occurs when the financial statements for the entire federal
government are consolidated. In this regard, as part of Treasury's annual
financial statement audits, Treasury's auditors have requested that the
RRB confirm the transferred amounts at issue as outstanding loan
balances. The RRB has returned these annual balance confirmations with
negative responses and indicated that the amounts at issue have been
classified as *donated capital* on the RRB's financial statement. Letter
from Assistant Commissioner, Office of Public Debt Accounting, Department
of the Treasury, Bureau of Public Debt, to the Comptroller General,
January 12, 2001.
DISCUSSION
In interpreting provisions of a statute, we follow the settled rule of
statutory construction that provisions with unambiguous language and
specific directions may not be construed in any manner that will alter or
extend their plain meaning.
Mallard v. United States District Court, 490 U.S. 296 (1989); B-271845,
Aug. 23, 1996. However, if giving effect to the plain meaning of words in
a statute leads to an absurd result which is clearly unintended and at
variance with the policy of the legislation as a whole, the purpose of the
statute rather than its literal words will be followed. See Auburn
Housing Authority v. Martinez, 277 F.3d 138, 144 (2d Cir. 2002)
(*Statutory construction . . . is a holistic endeavor. . . . [T]he
preferred meaning of a statutory provision is one that is consonant with
the rest of the statute.*). Consequently, statutory phrases and
individual words cannot be viewed in isolation. See Davis v. Michigan
Dept. of Treasury, 489 U.S. 803, 809 (1989) (*It is a fundamental canon of
statutory construction that the words of a statute must be read in their
context and with a view to their place in the overall statutory scheme.*);
United States v. Morton, 467 U.S. 822, 828 (1984) (*We do not . . .
construe statutory phrases in isolation; we read statutes as a whole . . .
Words . . . must be read in light of the immediately following phrase.*).
With this in mind, we agree with the RRB's position that it is not under
any obligation regarding the repayment of the funds transferred under the
1983 Act. While the amount transferred was called a loan, section
15(d)(6) clearly states that the sums *shall be repaid to the extent sums
are appropriated for that purpose.* The obvious intention is that the
amounts transferred would be restored to the Treasury only by future
appropriation action of the Congress, not by the RRB. This interpretation
is consonant with the purpose of the entire new subdivision, stated in
section 15(d)(3) as being to *place the Railroad Retirement Account in the
same position it would have been on that date if no annuity amounts had
been paid during the period beginning January 1, 1975 and ending September
30, 1981.* See B-271845, supra (the clear intent of Congress must be
determined by giving all language of the statute its plain meaning). To
read the term *loan* as strictly as Treasury does is inconsistent with the
plain language of the statute, and would thwart the purpose of this
section of the 1983 Act.
The legislative history of the 1983 Act supports this interpretation.
Treasury, citing the House Report in favor of its view, took one of the
Report's points out of context (see our statement of Treasury's position
above). In addition to noting that *amounts transferred* would be
*repaid,* the Report contained the fuller explanation of the 1983 Act
amendment to section 15(d) of the 1974 Act:
*The 1974 Railroad Retirement Act provided for the phasing out of dual
benefits, additional benefits which accrued to individuals as a result of
dual service under both railroad retirement and social security. The
clear intent of that Act was that the cost of dual benefits was to be paid
out of general revenues. However, the Office of Management and Budget
ignored the law and requested less than what was needed to fully fund dual
benefits. Since full dual benefits were being paid to beneficiaries, the
difference came out of the railroad retirement account . . . . The total
shortfall to the account, between 1974 and 1981, as a result of OMB's
underfunding decision, stands now at $1.7 billion, including foregone
interest.
*The agreement[9] proposes the transfer of the unpaid amount owing to the
railroad retirement account in three installments . . . . Each
installment would be borrowed from the treasury on the appropriate date,
with the amounts borrowed to be repaid upon appropriations for that
purpose. Since each transfer would be an intragovernmental transfer,
there would be no effect on the budget deficit.*
H.R. Rep. No. 98-30 Part I, supra at 29 (emphasis added). The Committee's
point was that since the 1974 Act, Congress had intended that the cost of
the dual benefits/windfall payments should be borne by the general fund
and not by the railroad retirement system; as a result RRB had to be
recompensed for having covered the shortfall between 1974 and 1981.
Interestingly, Representative Florio, the sponsor of the legislation,
described the language as follows:
*A. Repayment of debt owed to system
The Railroad Retirement System would be repaid the debt owed it by the
Treasury as a result of past underfunding of the dual benefit.*
129 Congressional Record H 6135 (daily ed. August 1, 1983). The plain
reading of that sentence indicates that to the extent there was a *loan,*
it was not the amounts transferred to RRB as a result of the 1983 Act, but
the costs RRB incurred between 1974 and 1981 on behalf of the general
fund.
Regarding Treasury's view that, even if the RRB is not directly required
to repay the sums transferred under the 1983 Act, it is under an
obligation to seek the requisite congressional action, we could find
nothing in the statute or its legislative history to support this view.
The situation here can be distinguished from that in our decision in 63
Comp. Gen. 470, supra. In that case, although Congress had authorized the
payment of litigation costs in Tax Court cases, no funds had been
specifically appropriated for that purpose. Moreover, the legislative
history of the provision,
26 U.S.C. S: 7430, indicated that Congress did not intend that agency
funds be used to pay such awards, and the permanent indefinite judgment
fund appropriation, established by 31 U.S.C. S:1304 for costs of judgments
and settlements, was not available to pay the awards because section 1304
does not apply to the Tax Court. In that case, we recommended that, since
the intention of Congress to provide litigation costs would be thwarted by
inaction, IRS request specific appropriations to cover the costs of
awards, or, in the alternative, Congress could make the permanent judgment
fund appropriation of section 1304 available for such costs. In the case
at issue here, however, the intention of Congress would not be thwarted by
inaction, since as we have already demonstrated the intention was, in
fact, to reimburse the RRB, which the 1983 Act accomplished.
CONCLUSION
In view of the foregoing, the RRB is not under any legal obligation
regarding the funds transferred under the 1983 Act. To the extent that
Treasury and RRB require advice on the appropriate financial statement
treatment of the transfer, we would refer Treasury and RRB to the good
offices of the Federal Accounting Standards Advisory Board.
/s/
Anthony H. Gamboa
General Counsel
------------------------
[1] Pub. L. No. 93-445, Title I, S: 3(h)(1), 88 Stat. 1305, 1323-24
(1974), codified at
45 U.S.C. S: 231b(h).
[2] Id. S: 15(d), 88 Stat. 1347-1348, codified at 45 U.S.C. S: 231n(d);
see also, H.R. Rep. No. 98-30 Part I, supra at 20, 29; S. Rep. No.
93-1163, 93rd Cong., 2d Sess. (1974) reprinted in 1974 U.S.C.C.A.N. 5702.
[3] Omnibus Budget Reconciliation Act of 1981, Pub. L. No. 97-35, Title
XI, Subtitle D, S:1122(c), 95 Stat. 357, 639 (1981), codified at 45 U.S.C.
S: 231f(c).
[4] See H.R. Rep. No. 98-30, Part I, supra at 19-27; 52-53; 116-118.
[5] Treasury's submission to this Office included a Department of
Treasury, Bureau of the Public Debt Chief Counsel Memorandum, *Railroad
Retirement Account Borrowings,* October 26, 1999, which set forth the
legal positions discussed.
[6] Black's Law Dictionary, Seventh Edition, defines *loan* as *an act of
lending . . . for temporary use.*
[7] According to Treasury, the request for appropriation or forgiveness of
the debt can be achieved through the RRB's annual budget plan, which is
presented by the President to Congress. Treasury suggests that in making
a specific budget request, the RRB can make a budget submission requesting
a specific amount of funding for repayment of the funds and Congress can
make a specific line-item appropriation for that purpose, or the RRB can
request a lump-sum appropriation and pay the loans from the lump-sum
amount.
[8] RRB's submission to this Office included a Memorandum from the General
Counsel to the Chief Financial Officer, *Repayment of Amounts Transferred
Pursuant to Section 15(d)(2) of the Railroad Retirement Act,* September
13, 2000, and a Memorandum from the Chief Financial Officer to The Board,
*Discussion with Treasury officials regarding $2.1 billion loan repayment
issue,* April 30, 1999, both of which set forth RRB's position on this
issue.
[9] Here *agreement* refers to a compromise reached between the Committee
on Ways and Means and the Committee on Energy and Commerce, to whom the
bill (H.R. 1646) was referred.