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

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

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

 
       RAILROAD RETIREMENT AND SURVIVORS' IMPROVEMENT ACT OF 2000

                                _______
                                

 July 26, 2000.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

    Mr. Archer, from the Committee on Ways and Means, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 4844]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 4844) to modernize the financing of the railroad 
retirement system and to provide enhanced benefits to employees 
and beneficiaries, having considered the same, report favorably 
thereon with an amendment and recommend that the bill as 
amended do pass.

                                CONTENTS

                                                                   Page
 I. Summary and Background...........................................12
        A. Purpose and Summary...................................    12
        B. Background and Need for Legislation...................    13
        C. Legislative History...................................    13
II. Explanation of the Bill..........................................13
        A. Railroad Retirement Reform............................    13
            1. Amendments to the Railroad Retirement Act of 1974.    13
                a. Structure and administration of railroad 
                    employee benefit system......................    13
                b. Increased railroad retirement benefits........    15
            2. Amendments to the Internal Revenue Code of 1986...    16
        B. Repeal the 4.3-ents-Per-Gallon General Fund Excise 
            Taxes on Train Diesel Fuel and Inland Waterway Barge 
            Fuels................................................    19
III.Votes of the Committee...........................................19

IV. Budget Effects of the Bill.......................................20
        A. Committee Estimates of Budgetary Effects..............    20
        B. Budget Authority and Tax Expenditures.................    22
        C. Cost Estimate Prepared by the Congressional Budget 
            Office...............................................    22
 V. Other Matters To Be Discussed Under the Rules of the House.......24
        A. Committee Oversight Findings and Recommendations......    24
        B. Summary of Findings and Recommendations of the 
            Committee on Government Reform and Oversight.........    24
        C. Constitutional Authority Statement....................    24
        D. Information Relating to Unfunded Mandates.............    24
        E. Applicability of House Rule XXI5(b)...................    24
        F. Tax Complexity Analysis...............................    24
VI. Changes in Existing Law Made by the Bill as Reported.............25

    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

Sec. 1. Short title; table of contents.

         TITLE I--AMENDMENTS TO RAILROAD RETIREMENT ACT OF 1974

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

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

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

TITLE III--REPEAL OF 4.3-CENT MOTOR FUEL EXCISE TAXES ON RAILROADS AND 
      INLAND WATERWAY TRANSPORTATION WHICH REMAIN IN GENERAL FUND

Sec. 301. Repeal of 4.3-cent motor fuel excise taxes on railroads and 
inland waterway transportation which remain in general fund.

         TITLE I--AMENDMENTS TO RAILROAD RETIREMENT ACT OF 1974

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

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

SEC. 102. RETIREMENT AGE RESTORATION.

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

SEC. 103. VESTING REQUIREMENT.

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

SEC. 104. REPEAL OF RAILROAD RETIREMENT MAXIMUM.

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

SEC. 105. INVESTMENT OF RAILROAD RETIREMENT ASSETS.

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

SEC. 106. ELIMINATION OF SUPPLEMENTAL ANNUITY ACCOUNT.

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

SEC. 107. TRANSFER AUTHORITY REVISIONS.

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

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

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

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

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

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

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

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

SEC. 203. REPEAL OF SUPPLEMENTAL ANNUITY TAX.

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

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

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

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

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

             ``Subchapter E--Tier 2 Tax Rate Determination

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

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

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

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

                                     

  ``(c) Definitions Related to Determination of Rates of Tax.--
          ``(1) Average account benefits ratio.--For purposes of this 
        section, the term `average account benefits ratio' means, with 
        respect to any calendar year, the average determined by the 
        Secretary of the account benefits ratios for the 10 most recent 
        fiscal years ending before such calendar year. If the amount 
        determined under the preceding sentence is not a multiple of 
        0.1, such amount shall be increased to the next highest 
        multiple of 0.1.
          ``(2) Account benefits ratio.--For purposes of this section, 
        the term `account benefits ratio' means, with respect to any 
        fiscal year, the amount determined by the Railroad Retirement 
        Board by dividing the fair market value of the assets in the 
        Railroad Retirement Account and of the Railroad Retirement 
        Investment Trust (and for the years before 2001, the Social 
        Security Equivalent Benefits Account) as of the close of such 
        fiscal year by the total benefits and administrative expenses 
        paid from the Railroad Retirement Account and the Railroad 
        Retirement Investment Trust during such fiscal year.
  ``(d) Notice.--No later than December 1 of each calendar year, the 
Secretary shall publish a notice in the Federal Register of the rates 
of tax determined under this section which are applicable for the 
following calendar year.''.
  (e) Conforming Amendments.--
          (1) Section 24(d)(3)(A)(iii) is amended by striking ``section 
        3211(a)(1)'' and inserting ``section 3211(a)''.
          (2) Section 72(r)(2)(B)(i) is amended by striking ``section 
        3211(a)(2)'' and inserting ``section 3211(b)''.
          (3) Paragraphs (2)(A)(iii)(II) and (4)(A) of section 3231(e) 
        is amended by striking ``3211(a)(1)'' and inserting 
        ``3211(a)''.
          (4) Section 3231(e)(2)(B)(ii)(I) is amended by striking 
        ``3211(a)(2)'' and inserting ``3211(b)''.
          (5) The table of subchapters for chapter 22 is amended by 
        adding at the end the following new item:

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

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

TITLE III--REPEAL OF 4.3-CENT MOTOR FUEL EXCISE TAXES ON RAILROADS AND 
      INLAND WATERWAY TRANSPORTATION WHICH REMAIN IN GENERAL FUND

SEC. 301. REPEAL OF 4.3-CENT MOTOR FUEL EXCISE TAXES ON RAILROADS AND 
                    INLAND WATERWAY TRANSPORTATION WHICH REMAIN IN 
                    GENERAL FUND.

  (a) Taxes on Trains.--
          (1) In general.--Subparagraph (A) of section 4041(a)(1) of 
        the Internal Revenue Code of 1986 is amended by striking ``or a 
        diesel-powered train'' each place it appears and by striking 
        ``or train''.
          (2) Conforming amendments.--
                  (A) Subparagraph (C) of section 4041(a)(1) of such 
                Code is amended by striking clause (ii) and by 
                redesignating clause (iii) as clause (ii).
                  (B) Subparagraph (C) of section 4041(b)(1) of such 
                Code is amended by striking all that follows ``section 
                6421(e)(2)'' and inserting a period.
                  (C) Subsection (d) of section 4041 of such Code is 
                amended by redesignating paragraph (3) as paragraph (4) 
                and by inserting after paragraph (2) the following new 
                paragraph:
          ``(3) Diesel fuel used in trains.--There is hereby imposed a 
        tax of 0.1 cent per gallon on any liquid other than gasoline 
        (as defined in section 4083)--
                  ``(A) sold by any person to an owner, lessee, or 
                other operator of a diesel-powered train for use as a 
                fuel in such train, or
                  ``(B) used by any person as a fuel in a diesel-
                powered train unless there was a taxable sale of such 
                fuel under subparagraph (A).
        No tax shall be imposed by this paragraph on the sale or use of 
        any liquid if tax was imposed on such liquid under section 
        4081.''
                  (D) Subsection (f) of section 4082 of such Code is 
                amended by striking ``section 4041(a)(1)'' and 
                inserting ``subsections (d)(3) and (a)(1) of section 
                4041, respectively''.
                  (E) Paragraph (3) of section 4083(a) of such Code is 
                amended by striking ``or a diesel-powered train''.
                  (F) Paragraph (3) of section 6421(f) of such Code is 
                amended to read as follows:
          ``(3) Gasoline used in trains.--In the case of gasoline used 
        as a fuel in a train, this section shall not apply with respect 
        to the Leaking Underground Storage Tank Trust Fund financing 
        rate under section 4081.''
                  (G) Paragraph (3) of section 6427(l) of such Code is 
                amended to read as follows:
          ``(3) Refund of certain taxes on fuel used in diesel-powered 
        trains.--For purposes of this subsection, the term `nontaxable 
        use' includes fuel used in a diesel-powered train. The 
        preceding sentence shall not apply to the tax imposed by 
        section 4041(d) and the Leaking Underground Storage Tank Trust 
        Fund financing rate under section 4081 except with respect to 
        fuel sold for exclusive use by a State or any political 
        subdivision thereof.''
  (b) Fuel Used on Inland Waterways.--
          (1) In general.--Paragraph (1) of section 4042(b) of such 
        Code is amended by adding ``and'' at the end of subparagraph 
        (A), by striking ``, and'' at the end of subparagraph (B) and 
        inserting a period, and by striking subparagraph (C).
          (2) Conforming amendment.--Paragraph (2) of section 4042(b) 
        of such Code is amended by striking subparagraph (C).
  (c) Effective Date.--The amendments made by this section shall take 
effect on October 1, 2000.

                       I. SUMMARY AND BACKGROUND

                         A. Purpose and Summary

                                purpose

    The bill, H.R. 4844, as amended (the ``Railroad Retirement 
and Survivors' Improvement Act of 2000'') will reform the 
railroad retirement system and eliminate disparate excise tax 
treatment among transportation service providers.
    The railroad retirement reform provisions of the bill have 
a net budgetary reduction of over $17.6 billion over fiscal 
years 2000-2005. The repeal of the 4.3-cents-per-gallon General 
Fund excise taxes on railroad and inland waterway fuels 
provides a net reduction in taxes of $566 million over fiscal 
years 2001-2005.

                                summary

Railroad retirement reform

    Railroad Retirement Trust Fund.--The bill creates a new 
railroad retirement investment trust (the ``Trust'') to 
administer a new railroad retirement trust fund (the ``Fund'') 
established outside of Treasury. The Trust will be governed by 
a seven-member board of trustees which will independently 
manage and invest the assets of the Fund.
    Railroad retirement benefits.--The bill increases tier 2 
benefits for widows and widowers to 100 percent of the deceased 
employee's benefits on the date of death. Also, the bill 
reduces the number of years of covered service to be vested in 
the railroad retirement system from 10 years to 5 years. In 
addition, the bill reduces the age at which full benefits are 
payable from 62 to 60 for employees with at least 30 years of 
rail service. Finally, the bill repeals the present-law maximum 
limit on monthly railroad retirement benefits.
    Amendments to the Internal Revenue Code of 1986 (the 
``Code'').--The bill makes the following changes to the Code: 
(1) Lowers the tier 2 payroll tax rates for employers and 
employee representatives in 2001 and 2002 and provides a 
modified method of calculating the rate of all tier 2 taxes 
after 2002; (2) repeals the supplemental annuity tax; and (3) 
provides tax-exempt status for the Trust.

Excise tax on railroad and inland waterway fuels

    The bill repeals the 4.3-cents-per-gallon General Fund 
excise taxes on diesel fuel used in trains and fuel used in 
barges operating on the designated inland waterways system.

                 B. Background and Need for Legislation

    The railroad retirement reform provisions approved by the 
Committee reflect the need for reform of the railroad employee 
benefit system while increasing certain railroad retirement 
benefits and reducing certain railroad retirement taxes. The 
bill also eliminates disparate treatment between rail and barge 
transportation providers and other competing providers by 
repealing a general fund fuel tax imposed on the rail and barge 
industry.

                         C. Legislative History

                            committee action

    The Committee on Ways and Means marked up the provisions of 
the bill on July 25, 2000, and approved the provisions, as 
amended, on July 25, 2000, by a voice vote with a quorum 
present.

                      II. EXPLANATION OF THE BILL

                     A. Railroad Retirement Reform

1. Amendments to the Railroad Retirement Act of 1974

  a. Structure and administration of railroad employee benefit system 
(secs. 105108 of the bill and secs. 3, 4, 7, 15, and 22 of the Railroad 
                        Retirement Act of 1974)

                              Present Law

    The Railroad Retirement Board is the Federal agency 
responsible for the administration of the Federal employment 
benefits system earned through railroad industry employment. It 
is headed by a three-member governing board that oversees its 
operations. The railroad retirement system provides retirement, 
disability and survivor benefits to qualifying individuals.\1\ 
Generally, a qualifying individual is any eligible individual 
with at least ten years of railroad service and such an 
individual's spouse and dependents. The system, funded 
primarily by payroll taxes on covered employers and employees, 
includes a benefit roughly equivalent to Social Security (the 
``tier 1'' benefit), an additional benefit similar to those 
provided in some private defined benefit pension plans (the 
``tier 2'' benefit), and certain other benefits. Amounts 
received into the railroad retirement system are held in 
Federal accounts (primarily in the railroad retirement account) 
within the Federal Treasury until needed to pay benefits. The 
money in these accounts is invested in special interest-bearing 
Treasury obligations.
---------------------------------------------------------------------------
    \1\ The railroad unemployment insurance system also provides 
uniform unemployment insurance to covered employees.
---------------------------------------------------------------------------

                           Reasons for Change

    Between 1985 and 1998, the average annual return on 
Railroad Retirement Account (RRA) assets was 9.12 percent. This 
return lagged far behind the 15.17 percent return earned by 
large multi-employer pension plans over the same period. The 
bill allows the railroad retirement industry pension (tier 2) 
to take advantage of the higher returns available in the 
private sector in an account established outside of Treasury. 
The increased income projected from private investment permits 
an increase in employee benefits and a reduction in employer 
tax rates while maintaining an average benefit reserve of 4 
years or more.

                        Explanation of Provision

Railroad Retirement Trust Fund

    The bill creates a new railroad retirement investment trust 
(the ``Trust'') to administer a new railroad retirement trust 
fund (the ``Fund'') established outside of Treasury. The bill 
describes the Trust as a private entity which is not a 
department, agency, or instrumentality of the Federal 
government. The Trust will be governed by a seven-member board 
of trustees.\2\ The board will independently manage and invest 
the assets of the Fund. Five members of the board will comprise 
a quorum and, with the exception of the adoption of investment 
guidelines, which must be by a unanimous vote of the trustees, 
all decisions will be made by a majority vote. The board of 
trustees will: (1) set investment guidelines for the management 
of Fund assets and select outside investment advisors and 
managers to implement the board's decisions; (2) transfer funds 
to a centralized, nongovernmental disbursement agent that will 
pay the various components of the railroad retirement benefits 
in a single check to beneficiaries; and (3) pay administrative 
expenses of the Trust. The board will be subject to fiduciary 
standards similar to those applicable to pension fund 
fiduciaries under the Employee Retirement Income Security Act 
of 1974, as amended These fiduciary standards will be enforced 
by the Railroad Retirement Board.
---------------------------------------------------------------------------
    \2\ The board of trustees will be comprised of the following seven 
members: (1) three will represent the interests of labor; (2) three 
will represent the interests of management; and (3) one will represent 
the interests of the general public. The three members of the Railroad 
Retirement Board will not be eligible to serve on the board of 
trustees. The term of each member of the board of trustees will be 
three years but the initial members will have staggered terms.
---------------------------------------------------------------------------
    The Trust's financial statements will be audited by an 
independent qualified public accountant. The Trust will be 
required to produce an annual management report to Congress 
about the operations and financial condition of the Trust and 
the Fund. The Trust's legal domicile will be the District of 
Columbia.

Transfers to the fund

    Upon the creation of the Trust and the Fund, the Railroad 
Retirement Board will direct the Secretary of the Treasury to 
transfer to the Fund: (1) the portion of the railroad 
retirement account which is not needed to pay current 
administrative expenses; and (2) the portion of the Social 
Security equivalent benefit account \3\ which is not needed to 
pay current benefits. The board of trustees for the Trust are 
to consult with the Secretary of the Treasury to develop an 
appropriate method for transferring or converting existing 
obligations held by the accounts.
---------------------------------------------------------------------------
    \3\ The Social Security equivalent benefit account annually 
receives amounts from or pays amounts to the Social Security trust 
funds based upon a hypothetical calculation which assumes railroad 
employment had been directly covered by Social Security.
---------------------------------------------------------------------------

                             Effective Date

    The provisions generally are effective on the date of 
enactment.

 b. Increased railroad retirement benefits (secs. 101-104 of the bill 
  and secs. 2, 3, 4, 5, 18, and 19 of the Railroad Retirement Act of 
                                 1974)

                              Present Law

Annuity benefits for widows and widowers

    The railroad retirement system, funded primarily by payroll 
taxes on covered employers and employees, provides a benefit 
roughly equivalent to Social Security (the ``tier 1'' benefit), 
an additional benefit similar to those provided in some private 
defined benefit pension plans (the ``tier 2'' benefit), and 
certain other benefits. The spouse of a deceased railroad 
employee may be eligible for any of these benefits.\4\ A 
widow's or widower's tier 1 benefit generally equals the amount 
of the deceased employee's tier 1 benefits on the date of 
death. Tier 2 benefits for the widow or widower, however, are 
limited to one-half of the deceased employee's tier 2 benefits 
on the date of death.
---------------------------------------------------------------------------
    \4\ Generally, the benefits for the surviving spouse are calculated 
with reference to the railroad retirement benefit for the deceased 
employee at the date of death before any benefit reductions required 
under the Railroad Retirement Act, the Social Security Act, and any 
public service pension.
---------------------------------------------------------------------------

Retirement age

    Generally, an employee aged 60 with 30 years of service may 
retire and collect full tier 2 benefits. However, tier 1 
benefits for an employee aged 60 with 30 years of service are 
actuarially reduced for retirement before age 62.

Vesting requirements

    Under present law, an employee must have 10 years of 
covered service to be vested in the railroad retirement system.

Railroad retirement maximum benefit

    Present law limits the total amount of monthly railroad 
retirement benefits payable to an employee and an employee's 
spouse at the time the employee's annuity payout begins. The 
maximum benefit is based on the highest two years of creditable 
railroad retirement or social security covered earnings in the 
10-year period ending with the year the employee's annuity 
payout begins.

                           Reasons for Change

    The bill makes several changes to the benefit structure of 
the Railroad Retirement system. First, widow(er) benefits are 
increased. This change is made because widow(er) benefits are 
thought to be inadequate. Concurrent resolutions (H. Con. Res. 
52 and S. Con. Res. 80) introduced in both the House of 
Representatives and the Senate urged rail labor, management, 
and retirees to negotiate an improvement to widow(er) benefits. 
This proposal incorporates the negotiated improvements. Second, 
vesting requirements are reduced from 10 years to 5 years. 
Under current law, workers with less than 10 years of rail 
service are ineligible for benefits under the railroad 
retirement system, and they forfeit all of their payroll tax 
contributions to the system. A 5-year vesting requirement is 
consistent with many multi-employer pension plans covered by 
ERISA. Third, the retirement age at which full benefits are 
payable for career workers is reduced from 62 to 60 for Tier I. 
(Historically, the full retirement age was 60. However, the age 
was increased to 62 in 1983 when the Railroad Retirement system 
faced insolvency.) Finally, the railroad benefit maximum is 
repealed. This provision in current law is intended to limit 
benefits for certain workers. However, it unintentionally 
affects spouses and many low-wage workers who may have worked 
in low-paying jobs in the 10 years prior to benefit 
entitlement.

                        Explanation of Provision

Benefits for widows and widowers

    The bill increases tier 2 benefits for widows and widowers 
to 100 percent of the deceased employee's benefits on the date 
of death. When coupled with the present-law tier 1 benefit for 
widows and widowers, the bill provides widows and widowers 
essentially the same benefit as that payable to the railroad 
employee prior to death.

Retirement age

    The bill reduces the age at which full tier 1 benefits are 
payable from 62 to 60 for employees with at least 30 years of 
rail service.

Vesting requirements

    The bill reduces the years of covered service to be vested 
in the railroad retirement system from the present 10 years to 
5 years. For this purpose, employees with less than 10 years of 
railroad employment before 1996 will have to meet either the 
10-year vesting requirement or have 5 years of post-1995 
railroad service to be vested.

Railroad retirement maximum benefit

    The bill repeals the present-law maximum limit on monthly 
railroad retirement benefits.

                             Effective Date

    The provision related to the expansion of benefits to 
widows and widowers is effective on January 1, 2001, and 
applies to annuity amounts accruing after December 31, 2000. 
The provision related to retirement is effective for annuities 
that begin to accrue on or after January 1, 2001. The provision 
relating to the faster vesting requirement is effective after 
December 31, 2001. The provision relating to the repeal of the 
railroad retirement maximum benefit is effective on January 1, 
2001, and applies to annuity amounts accruing for months after 
December 31, 2000.

2. Amendments to the Internal Revenue Code of 1986 (the ``Code'') 
        (secs. 201-204 of the bill and secs. 501, 3201, 3211, 3221, and 
        3241 of the Code)

                              Present Law

In general

    Present law also imposes a tier 1 tax on railroad 
employers, employees, and employee representatives. This tax is 
essentially equivalent to Social Security taxes, and is used 
primarily to fund tier 1 benefits, which are essentially 
equivalent to Social Security benefits. Tier 2 railroad 
retirement benefits are funded primarily through a tier 2 
payroll tax. Present law also imposes a supplemental annuity 
tax, which is used to finance supplemental annuity benefits, as 
well as some tier 2 benefits.

Tier 2 payroll taxes

    Present law imposes a tier 2 payroll tax on railroad 
employers, employees, and employee representatives. The tax on 
employers is equal to 16.1 percent of covered compensation. The 
employee-level tax is equal to 4.9 percent of covered 
compensation.\5\ The tier 2 tax on railroad employee 
representatives is equal to 14.75 percent of covered 
compensation.
---------------------------------------------------------------------------
    \5\ Like tier 1 and Social Security taxes, the employee-level tier 
2 tax is deducted from the employee's compensation and remitted by the 
employer.
---------------------------------------------------------------------------
    The maximum amount of compensation taken into account for 
tier 2 payroll tax purposes is $56,700 (for 2000).

Supplemental annuity tax

    A cents-per-hour tax is imposed on railroad employers and 
employee representatives to fund supplemental annuity benefits. 
The rate of tax is determined quarterly by the Railroad 
Retirement Board based on the level necessary to fund current 
benefits, plus administrative costs. The current rate of tax is 
26.5 cents per hour. Special rules apply in the case of an 
employer with respect to employees covered by a supplemental 
pension plan established pursuant to collective bargaining.

                           Reasons for Change

    The bill reduces the tier 2 payroll tax rate paid by 
employers and employee representatives and provides a tax 
adjustment mechanism for years after 2002. According to the 
Railroad Retirement Board, the assets of the RRA at the end of 
2000 will be sufficient to pay more than 5 years of benefits. 
As a result, the tier 2 tax rate can be lowered over the next 
two years without impacting the ability to pay benefits. Beyond 
the next two years, the tax rate will be set each calendar year 
pursuant to a statutory formula based on the average benefit 
ratio. If the program becomes underfunded, the tax rate will 
automatically increase to bolster the system's income, placing 
the burden and investment risk on the industry rather than the 
general taxpayer. Alternatively, if the trust fund balance 
increases to a certain level relative to benefit payments, tax 
rates will decrease. The automatic tax adjustment mechanism 
allows the tax rate to be more responsive to the system's 
financing needs.

                        Explanation of Provision

In general

    The bill makes the following changes to the Code: (1) 
lowers the tier 2 payroll tax rates for employers and employee 
representatives in 2001 and 2002 and provides a modified method 
of calculating the rate of all tier 2 taxes after 2002; (2) 
repeals the supplemental annuity tax; and (3) provides tax-
exempt status for the Trust created by the bill (described in 
A.1., above).

Payroll taxes

    The bill lowers the tier 2 tax rate on employers to 15.6 
percent of covered compensation in 2001 and 14.2 percent in 
calendar year 2002. The bill lowers the tier 2 tax rate for 
employee representatives to 14.75 percent of covered 
compensation in 2001 and 14.2 percent in calendar year 2002. 
The bill does not change the tier 2 tax on employees for 2001 
and 2002.
    Beginning in calendar year 2003, the bill provides for 
automatic modifications in the tier 2 tax rates for employers, 
employee representatives, and employees based on the ratio of 
certain asset balances to the sum of benefits and 
administrative expenses (the ``average account benefits 
ratio''). The average account benefits ratio is the sum of the 
account benefits ratio for the previous 10 fiscal years divided 
by 10. The account benefits ratio is determined by dividing the 
sum of the fair market value of the assets in the railroad 
retirement account and the Trust at the close of the fiscal 
year by the sum of total benefit payments and administrative 
expenses of the Trust for such fiscal year. Because the average 
account benefits ratio is expected to be between 4.0 and 6.1 in 
2003, the table is designed to produce a 13.1 tax rate for 
employers and employee representatives and a 4.9 tax rate for 
employees in calendar year 2003. The Secretary of the Treasury 
is to use the following table to make adjustments to the tier 2 
tax rates.

----------------------------------------------------------------------------------------------------------------
             Average account benefits ratio                Applicable percentage for
---------------------------------------------------------    employer and employee     Applicable percentage for
                                                           representive tier 2 taxes     employee tier 2 taxes
          At least                  But less than                  (percent)                   (percent)
----------------------------------------------------------------------------------------------------------------
                                                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
----------------------------------------------------------------------------------------------------------------

Supplemental annuity tax

    The bill repeals the supplemental annuity tax.\6\ 
Supplemental annuity benefits are not affected by the 
elimination of the supplemental annuity tax.
---------------------------------------------------------------------------
    \6\ The funds in the supplemental annuity account will be 
transferred to the Fund and the account will be eliminated by the 
Railroad Retirement Board as soon as possible after December 31, 2000.
---------------------------------------------------------------------------

Tax exemption for the trust

    The bill provides tax-exempt status under Code section 
501(c) for the Trust created under the bill.

                             effective date

    The provisions generally are effective for calendar years 
beginning after December 31, 2000. The provision relating to 
tax-exempt status of the Trust is effective on the date of 
enactment.

 B. Repeal the 4.3-Cents-Per-Gallon General Fund Excise Taxes on Train 
Diesel Fuel and Inland Waterways Barge Fuels (Sec. 301 of the Bill and 
           Secs. 4041, 4042, 4081-4083, and 6427 of the Code)

                              present law

    Diesel fuel used in trains is subject to a 4.4-cents-per-
gallon excise tax. Revenues from 4.3 cents per gallon of this 
excise tax are retained in the General Fund of the Treasury. 
The remaining 0.1 cent per gallon is deposited in the Leaking 
Underground Storage Tax (``LUST'') Trust Fund.
    Similarly, fuel used in barges operating on a designated 
inland waterways system is subject to a 4.3-cents-per-gallon 
General Fund excise tax. This tax is in addition to the 20.1-
cents-per-gallon tax rates that are imposed on fuel used in 
these barges to fund the Inland Waterways Trust Fund and the 
LUST Trust Fund.
    In both cases, the 4.3-cents-per-gallon excise tax rates 
are permanent. The LUST tax rate is scheduled to expire after 
March 31, 2005.

                           reasons for change

    In 1993, Congress enacted an additional 4.3-cents-per-
gallon excise tax rate on almost all motor fuels. Receipts from 
the tax were payable entirely to the General Fund for deficit 
reduction. Since 1993, Congress has transferred receipts from 
the 4.3-cents-per-gallon rate to specified trust funds in the 
case of transportation modes other than rail and inland 
waterway barges. In the case of the other transportation modes, 
programs financed by these trust funds benefit the persons 
bearing the ultimate burden of the taxes.
    The Committee is aware that rail and inland waterway barge 
operators compete with other transportation service providers 
who benefit from those trust funds. The Committee concluded 
that it is inequitable and distortive of transportation 
decisions to continue to impose the General Fund tax on rail 
and barge users. Further, any deficit reduction purpose for the 
4.3-cents-per-gallon tax rate has been eliminated by current 
budget surpluses.

                        explanation of provision

    The bill repeals the 4.3-cents-per-gallon General Fund 
excise taxes on diesel fuel used in trains and fuel used in 
barges operating on the designated inland waterways system.

                             effective date

    The provision is effective on October 1, 2000.

                      III. VOTES OF THE COMMITTEE

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the following statements are made 
concerning the votes of the Committee on Ways and Means in its 
consideration of the bill, H.R. 4844.

                       MOTION TO REPORT THE BILL

    The bill, H.R. 4844, as amended, was ordered favorably 
reported by a voice vote (with a quorum being present).

                     IV. BUDGET EFFECTS OF THE BILL

               A. Committee Estimate of Budgetary Effects

    In compliance with clause 3(d)(2) of rule XIII of the Rules 
of the House of Representatives, the following statement is 
made concerning the effects on the budget of the revenue 
provisions of the bill, H.R. 4844, as reported.
    The bill is estimated to have the following budget effects 
for fiscal years 2001-2010:

                    ESTIMATED BUDGET EFFECTS OF H.R. 4844, THE ``RAILROAD RETIREMENT AND SURVIVORS' IMPROVEMENT ACT OF 2000,'' AS REPORTED BY THE COMMITTEE ON WAYS AND MEANS
                                                                        [fiscal years 2001-2010, in millions of dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                   Provision                               Effective               2001      2002     2003     2004     2005     2006     2007     2008     2009     2010    2001-05    2001-10
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
  Railroad Retirement Provisions Contained in
                 H.R. 4844[1]

Changes in Direct Spending:
    1. Benefit Changes:
        a. Expansion of Widow/er Benefits.....  1/1/01........................        -68      -91      -91      -93      -94      -96      -98     -100     -101     -103       -437       -935
        b. Retirement Age Restoration.........  1/1/01........................        -31     -105     -172     -209     -234     -260     -304     -355     -391     -412       -751     -2,473
        c. Vesting Requirements...............  1/1/01........................  .........  .......  .......  .......  .......  .......       -1       -1       -1       -2  .........         -5
        d. Repeal of Railroad Retirement        1/1/01........................        -10      -14      -14      -15      -16      -17      -18      -19      -21      -23        -69       -167
         Maximum.
    2. Net Purchases of Private Securities[2].  1/1/01........................    -14,760     -180      -20      130      190      250      290      350      440      520    -14,640    -12,790
                                               -------------------------------------------------------------------------------------------------------------------------------------------------
      Total of Changes in Direct Spending.....  ..............................    -14,869     -390     -297     -186     -153     -124     -131     -125      -75      -20    -15,895    -16,370
                                               =================================================================================================================================================
Changes in Revenue:
    1. Repeal of Supplemental Annuity Tax[3]..  1/1/01........................        -60      -79      -81      -81      -79      -77      -76      -75      -74      -74       -380       -756
    2. Adjustment in Tier 2 Tax Rate[3].......  1/1/01........................        -74     -197     -321     -354     -357     -360     -367     -370     -377     -381     -1,303     -3,158
                                               -------------------------------------------------------------------------------------------------------------------------------------------------
      Total of Changes in Revenue.............  ..............................       -134     -276     -402     -435     -436     -437     -443     -445     -451     -455     -1,683     -3,914
                                               =================================================================================================================================================
      Total of Railroad Retirement Provisions   ..............................    -15,003     -666     -699     -621     -589     -561     -574     -570     -526     -475    -17,578    -20,284
       Contained in H.R. 4844 (All Direct
       Spending and Revenues).
Revenue Provision Contained in H.R. 4844--      10/1/00.......................       -105     -110     -113     -115     -123     -126     -129     -131     -135     -138       -566     -1,225
 Repeal the 4.3-Cents-Per-Gallon Tax on
 Railroad Diesel Fuel and Inland Waterway Fuel
 Currently Paid Into the General Fund.
                                               -------------------------------------------------------------------------------------------------------------------------------------------------
      Net Total...............................  ..............................    -15,108     -776     -812     -736     -712     -687     -703     -701     -661     -613    -18,144    -21,509
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1 Estimates provided by the Congressional Budget Office (``CBO'').
2 Scoring the purchase of non-U.S. securities follows the instruction fro OMB curricular A-11. Because CBO assumes that the investment board will maintain 20 percent of the portfolio in U.S.
  Treasury securities, small amounts of the investment returns from private securities are assumed to used to purchase additional Treasury securities.
3 Assumes payroll tax reductions are offset by 20 percent by income tax collections.

Note.--Details may not add to totals due to rounding.
Source: Joint Committee on Taxation.

    B. Statement Regarding New Budget Authority and Tax Expenditures

Budget authority

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
bill involves no new or increased budget authority.

Tax expenditures

    In compliance with clause 2(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
revenue-reducing income tax provisions do not involve increased 
tax expenditures. (See amounts in table in Part IV.A., above.)

      C. Cost Estimate Prepared by the Congressional Budget Office

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, requiring a cost estimate 
prepared by the Congressional Budget Office (``CBO''), the 
following statement by CBO is provided.

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 25, 2000.
Hon. Bill Archer,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the attached preliminary analysis of the effect on 
direct spending and revenues of H.R. 4844, the Railroad 
Retirement and Survivors' Improvement Act of 2000, as reported 
by the Committee on Ways and Means on July 25, 2000.
    H.R. 4844 would make a number of changes to the Railroad 
Retirement program. The legislation would expand certain types 
of pension benefits for those participating in the railroad 
retirement program and decrease the number of years of covered 
service needed before a worker (and qualified spouse) can be 
vested in the system. The legislation would also eliminate the 
supplemental annuity tax and reduce the railroad retirement 
payroll tax on railroad employers.
    The bill would create a new Railroad Retirement Investment 
Trust Fund and establish a board to manage funds in the new 
account. Funds not needed to pay benefits would be managed by 
the newly created investment board so as to ensure maximum 
financial return to the trust fund. Potential investment 
instruments would include government securities, corporate 
securities, and private equities.
    The Ways and Means version of this bill also contains a 
provision unrelated to the Railroad Retirement system. It would 
repeal the 4.3-cents-per-gallon excise tax on railroad diesel 
and inland waterway fuel.
    CBO estimates that H.R. 4844 would increase direct spending 
by $13.2 billion over the 2001-2005 period and by $9.7 billion 
over the 2001-2010 period. We also estimate that repealing the 
supplemental annuity tax and reducing railroad retirement 
payroll taxes would lower revenues by $1.7 billion during the 
2001-2005 period and by $3.9 billion over the 2001-2010 period 
(net of income tax effects). The Joint Committee on Taxation 
estimates that repealing the excise tax on railroad diesel fuel 
and inland waterway fuel would reduce revenue by $0.6 billion 
from 2001 through 2005 and by $1.2 billion from 2001 through 
2010. In total, H.R. 4844 would reduce the federal surplus by 
$15.4 billion during the 2001-2005 period and by $14.9 billion 
over the 2001-2010 period.
    These estimates assume that purchases of private securities 
would be shown as budget outlays, as is prescribed in the 
Office of Management and Budget Circular A-11. This budgetary 
treatment is unsettled, however, because the federal government 
has rarely if ever purchased such securities for investment 
purposes. Some of the potential alternative budgetary 
treatments would result in substantially different estimates of 
outlays.
    As indicated in a letter sent to you earlier today, the 
bill does not contain any intergovernmental or private-sector 
mandates as defined by the Unfunded Mandates Act.
    CBO will prepare a more detailed cost estimate for H.R. 
4844 and transmit it to the Congress. I hope this information 
is helpful to you. The CBO staff contact is Geoff Gerhardt.
            Sincerely,
                                           Steven Lieberman
                                       (For Dan Crippen, Director).
    Attachment.

 PRELIMINARY CBO ESTIMATE OF H.R. 4844, THE RAILROAD RETIREMENT AND SURVIVORS' IMPROVEMENT ACT OF 2000, AS ORDERED REPORTED BY THE COMMITTEE ON WAYS AND
                                                                          MEANS
                                                        By fiscal year, in millions of dollars--
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                              2000     2001       2002      2003      2004      2005      2006      2007      2008      2009      2010
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Changes in Direct Spending

Benefit Changes:
    Expansion of Widow/er Benefits.........      0          68        91        91        93        94        96        98       100       101       103
    Retirement Age Restoration.............      0          31       105       172       209       234       260       304       355       391       412
    Vesting Requirements...................      0       (\2\)     (\2\)     (\2\)     (\2\)     (\2\)     (\2\)         1         1         1         2
    Repeal of Railroad Retirement Maximum        0          10        14        14        15        16        17        18        19        21        23
     Benefit...............................
                                            ------------------------------------------------------------------------------------------------------------
      Subtotal.............................      0         109       210       277       316       343       374       421       475       515       540
Net Purchases of Private Securities \1\....      0      14,760      -460      -650      -830      -920      -990    -1,060    -1,130    -1,240    -1,340
                                            ------------------------------------------------------------------------------------------------------------
      Total................................      0      14,869      -250      -373      -514      -577      -616      -639      -655      -725      -800
                                            ============================================================================================================
                                                                   Changes in Revenue

Repeal of Supplemental Annuity Tax \3\.....      0         -60       -79       -81       -81       -79       -77       -76       -75       -74       -74
Adjustment in Tier 2 Tax Rate \3\..........      0         -74      -197      -321      -354      -357      -360      -367      -370      -377      -381
Repeal of Excise Tax on Railroad and Inland      0        -105      -110      -113      -115      -123      -126      -129      -131      -135      -138
 Waterway Fuels............................
                                            ------------------------------------------------------------------------------------------------------------
      Total................................      0        -239      -386      -515      -550      -559      -563      -572      -576      -586      -593
                                            ============================================================================================================
                                                           Total Changes in the Budget Surplus

Increase or Decrease (-) in the Surplus....      0     -15,108      -136      -142       -36        18        53        67        79       139       207
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Scoring the purchase of non-U.S. securities follows the instruction from OMB circular A-11. CBO assumes that the investment board will maintain 20
  percent of the portfolio in U.S. Treasury securities, 20 percent in corporate securities, and 60 percent in private equities.
\2\ Less than $500,000.
\3\ Assumes that 20 percent of payroll tax reductions are offset by increased income tax collections.

Notes.--Components may not sum to totals because of rounding.
Source: Congressional Budget Office and the Joint Committee on Taxation.

     V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE

          A. Committee Oversight Findings and Recommendations

    With respect to clause 3(c)(1) of rule XIII of the Rules of 
the House of Representatives (relating to oversight findings), 
the Committee advises that it was a result of the Committee's 
oversight review of the railroad retirement system and of 
Federal transportation excise taxes that the Committee 
concluded that it is appropriate and timely to enact the 
provisions included in the bill as reported.

    B. Summary of Findings and Recommendations of the Committee on 
                           Government Reform

    With respect to clause 3(c)(4) of rule XII of the Rules of 
the House of Representatives, the Committee advises that no 
oversight findings or recommendations have been submitted to 
this Committee by the Committee on Government Reform with 
respect to the provisions contained in the bill.

                 C. Constitutional Authority Statement

    With respect to clause 3(d)(1) of rule XIII of the Rules of 
the House of Representatives (relating to Constitutional 
Authority), the Committee states that the Committee's action in 
reporting this bill is derived from Article I of the 
Constitution, Section 8 (``The Congress shall have Power To lay 
and collect Taxes, Duties, Imposts and Excises * * *''), and 
from the 16th Amendment to the Constitution.

              D. Information Relating to Unfunded Mandates

    This information is provided in accordance with section 423 
of the Unfunded Mandates Act of 1995 (P.L. 104-4).
    The Committee has determined that the bill does not contain 
Federal mandates on the private sector. The Committee has 
determined that the bill does not impose a Federal 
intergovernmental mandate on State, local, and tribal 
governments.

                 E. Applicability of House Rule XXI5(b)

    Rule XXI5(b) of the Rules of the House of Representatives 
provides, in part, that ``No bill or joint resolution, 
amendment, or conference report carrying a Federal income tax 
rate increase shall be considered as passed or agreed to unless 
determined by a vote of not less than three-fifths of the 
Members.'' The Committee has carefully reviewed the provisions 
of the bill, and states that the provisions of the bill do not 
involve any Federal income tax rate increase within the meaning 
of the rule.

                       F. Tax Complexity Analysis

    Section 4022(b) of the Internal Revenue Service Reform and 
Restructuring Act of 1998 (the ``IRS Reform Act'') requires the 
Joint Committee on Taxation (in consultation with the Internal 
Revenue Service and the Department of the Treasury) to provide 
a tax complexity analysis. The complexity analysis is required 
for all legislation reported by the House Committee on Ways and 
Means, the Senate Committee on Finance, or any committee of 
conference if the legislation includes a provision that 
directly or indirectly amends the Internal Revenue Code and has 
widespread applicability to individuals or small businesses.
    The staff of the Joint Committee on Taxation has determined 
that a complexity analysis is not required under section 
4022(b) of the IRS Reform Act because the bill contains no 
provisions that amend the Internal Revenue Code and that have 
``widespread applicability'' to individuals or small 
businesses.

       VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

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

                    RAILROAD RETIREMENT ACT OF 1974

           *       *       *       *       *       *       *

                    annuity eligibility requirements

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

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

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

                   computation of employee annuities

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

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

              computation of spouse and survivor annuities

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

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

  (g)(1)  * * *

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

                   annuity beginning and ending dates

  Sec. 5. (a)  * * *

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

                           lump-sum payments

  Sec. 6. (a)  * * *

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

                     powers and duties of the board

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

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

                      railroad retirement account

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

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

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

               social security equivalent benefit account

    Sec. 15A. (a)  * * *

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

            crediting service under the social security act

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

         automatic benefit eligibility requirement adjustments

  Sec. 19. (a)  * * *

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

                          benefit preservation

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

           *       *       *       *       *       *       *

        computation and certification of account benefit ratios

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

                 SECTION 205 OF THE SOCIAL SECURITY ACT

           evidence, procedure, and certification for payment

    Sec. 205. (a) * * *

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

                              ----------                              

                     INTERNAL REVENUE CODE OF 1986

                       Subtitle A--Income Taxes

           *       *       *       *       *       *       *

                 CHAPTER 1--NORMAL TAXES AND SURTAXES

           *       *       *       *       *       *       *

              Subchapter A--Determination of Tax Liability

           *       *       *       *       *       *       *

                      PART IV--CREDITS AGAINST TAX

           *       *       *       *       *       *       *

               Subpart A--Nonrefundable Personal Credits

           *       *       *       *       *       *       *

SEC. 24. CHILD TAX CREDIT.

  (a)  * * *

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

              Subchapter B--Computation of Taxable Income

           *       *       *       *       *       *       *

         PART II--ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME

           *       *       *       *       *       *       *

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

  (a)  * * *

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

                  Subchapter F--Exempt Organizations

           *       *       *       *       *       *       *

                         PART I--GENERAL RULE

           *       *       *       *       *       *       *

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

  (a)  * * *

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

Subtitle C--Employment Taxes

           *       *       *       *       *       *       *

                 CHAPTER 22--RAILROAD RETIREMENT TAX ACT

           *       *       *       *       *       *       *

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

Subchapter A--Tax on Employees

           *       *       *       *       *       *       *

SEC. 3201. RATE OF TAX.

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

           *       *       *       *       *       *       *

             Subchapter B--Tax on Employee Representatives

           *       *       *       *       *       *       *

SEC. 3211. RATE OF TAX.

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

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

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

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

           *       *       *       *       *       *       *

                     Subchapter C--Tax on Employers

           *       *       *       *       *       *       *

SEC. 3221. RATE OF TAX.

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

           *       *       *       *       *       *       *

                   Subchapter D--General Provisions

           *       *       *       *       *       *       *

SEC. 3231. DEFINITIONS.

  (a)  * * *

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

              Subchapter E--Tier 2 Tax Rate Determination

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

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

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

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

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

           *       *       *       *       *       *       *

                Subtitle D--Miscellaneous Excise Taxes

           *       *       *       *       *       *       *

                     CHAPTER 31--RETAIL EXCISE TAXES

           *       *       *       *       *       *       *

                      Subchapter B--Special Fuels

           *       *       *       *       *       *       *

SEC. 4041. IMPOSITION OF TAX.

  (a) Diesel Fuel and Special Motor Fuels.--
          (1) Tax on diesel fuel in certain cases.--
                  (A) In general.--There is hereby imposed a 
                tax on any liquid other than gasoline (as 
                defined in section 4083)--
                          (i) sold by any person to an owner, 
                        lessee, or other operator of a diesel-
                        powered highway vehicle, [or a diesel-
                        powered train] for use as a fuel in 
                        such vehicle [or train], or
                          (ii) used by any person as a fuel in 
                        a diesel-powered highway vehicle, [or a 
                        diesel-powered train] unless there was 
                        a taxable sale of such fuel under 
                        clause (i).

           *       *       *       *       *       *       *

                  (C) Rate of tax.--
                          (i) In general.--Except as otherwise 
                        provided in this subparagraph, the rate 
                        of the tax imposed by this paragraph 
                        shall be the rate of tax specified in 
                        section 4081(a)(2)(A) on diesel fuel 
                        which is in effect at the time of such 
                        sale or use.
                          [(ii) Rate of tax on trains.--In the 
                        case of any sale for use, or use, of 
                        diesel fuel in a train, the rate of tax 
                        imposed by this paragraph shall be--
                                  [(I) 6.8 cents per gallon 
                                after September 30, 1993, and 
                                before October 1, 1995,
                                  [(II) 5.55 cents per gallon 
                                after September 30, 1995, and 
                                before November 1, 1998, and
                                  [(III) 4.3 cents per gallon 
                                after October 31, 1998.]
                          [(iii)] (ii) Rate of tax on certain 
                        buses.--
                                  (I) In general.--Except as 
                                provided in subclause (II), in 
                                the case of fuel sold for use 
                                or used in a use described in 
                                section 6427(b)(1) (after the 
                                application of section 
                                6427(b)(3)), the rate of tax 
                                imposed by this paragraph shall 
                                be 7.3 cents per gallon (4.3 
                                cents per gallon after 
                                September 30, 2005).
                                  (II) School bus and intracity 
                                transportation.--No tax shall 
                                be imposed by this paragraph on 
                                any sale for use, or use, 
                                described in subparagraph (B) 
                                or (C) of section 6427(b)(2).
  (b) Exemption for Off-Highway Business Use; Reduction in Tax 
for Qualified Methanol and Ethanol Fuel.--
          (1) Exemption for off-highway business use.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) Off-highway business use defined.--For 
                purposes of this subsection, the term ``off-
                highway business use'' has the meaning given to 
                such term by section 64:21(e)(2)[; except that 
                such term shall not, for purposes of subsection 
                (a)(1), include use in a diesel-powered train].

           *       *       *       *       *       *       *

  (d) Additional Taxes To Fund Leaking Underground Storage Tank 
Trust Fund.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Diesel fuel used in trains.--There is hereby 
        imposed a tax of 0.1 cent per gallon on any liquid 
        other than gasoline (as defined in section 4083)--
                  (A) sold by any person to an owner, lessee, 
                or other operator of a diesel-powered train for 
                use as a fuel in such train, or
                  (B) used by any person as a fuel in a diesel-
                powered train unless there was a taxable sale 
                of such fuel under subparagraph (A).
        No tax shall be imposed by this paragraph on the sale 
        or use of any liquid if tax was imposed on such liquid 
        under section 4081.
          [(3)] (4) Termination.--The taxes imposed by this 
        subsection shall not apply during any period during 
        which the Leaking Underground Storage Tank Trust Fund 
        financing rate under section 4081 does not apply.

           *       *       *       *       *       *       *

SEC. 4042. TAX ON FUEL USED IN COMMERCIAL TRANSPORTATION ON INLAND 
                    WATERWAYS.

  (a) * * *
  (b) Amount of Tax.--
          (1) In general.--The rate of the tax imposed by 
        subsection (a) is the sum of--
                  (A) the Inland Waterways Trust Fund financing 
                rate, and
                  (B) the Leaking Underground Storage Tank 
                Trust Fund financing rate[, and].
                  [(C) the deficit reduction rate.]
          (2) Rates.--For purposes of paragraph (1)--
                  (A) * * *

           *       *       *       *       *       *       *

                  [(C) The deficit reduction rate is 4.3 cents 
                per gallon.]

           *       *       *       *       *       *       *

                 CHAPTER 32--MANUFACTURERS EXCISE TAXES

           *       *       *       *       *       *       *

                      PART III--PETROLEUM PRODUCTS

           *       *       *       *       *       *       *

                 Subpart A--Gasoline and Diesel Fuel

           *       *       *       *       *       *       *

SEC. 4082. EXEMPTIONS FOR DIESEL FUEL AND KEROSENE.

  (a) * * *

           *       *       *       *       *       *       *

  (f) Cross reference.--

          For tax on train and certain bus uses of fuel purchased tax-
        free, see section [4041(a)(1)] subsections (d)(3) and (a)(1) of 
        section 4041, respectively.

           *       *       *       *       *       *       *

SEC. 4083. DEFINITIONS; SPECIAL RULE; ADMINISTRATIVE AUTHORITY.

  (a) Taxable Fuel.--For purposes of this subpart--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Diesel fuel.--The term ``diesel fuel'' means any 
        liquid (other than gasoline) which is suitable for use 
        as a fuel in a diesel-powered highway vehicle [or a 
        diesel-powered train].

           *       *       *       *       *       *       *

                Subtitle F--Procedure and Administration

           *       *       *       *       *       *       *

              CHAPTER 65--ABATEMENTS, CREDITS, AND REFUNDS

           *       *       *       *       *       *       *

              Subchapter B--Rules for Special Application

           *       *       *       *       *       *       *

SEC. 6421. GASOLINE USED FOR CERTAIN NONHIGHWAY PURPOSES, USED BY LOCAL 
                    TRANSIT SYSTEMS, OR SOLD FOR CERTAIN EXEMPT 
                    PURPOSES.

  (a) * * *

           *       *       *       *       *       *       *

  (f) Exempt Sales; Other Payments or Refunds Available.--
           * * *

           *       *       *       *       *       *       *

          [(3) Gasoline used in trains.--In the case of 
        gasoline used as a fuel in a train, this section shall 
        not apply with respect to--
                  [(A) the Leaking Underground Storage Tank 
                Trust Fund financing rate under section 4081, 
                and
                  [(B) so much of the rate specified in section 
                4081(a)(2)(A) as does not exceed--
                          [(i) 6.8 cents per gallon after 
                        September 30, 1993, and before October 
                        1, 1995,
                          [(ii) 5.55 cents per gallon after 
                        September 30, 1995, and before November 
                        1, 1998, and
                          [(iii) 4.3 cents per gallon after 
                        October 31, 1998.]
          (3) Gasoline used in trains.--In the case of gasoline 
        used as a fuel in a train, this section shall not apply 
        with respect to the Leaking Underground Storage Tank 
        Trust Fund financing rate under section 4081.

           *       *       *       *       *       *       *

SEC. 6427. FUELS NOT USED FOR TAXABLE PURPOSES.

  (a) * * *

           *       *       *       *       *       *       *

  (l) Nontaxable Uses of Diesel Fuel, Kerosene, and Aviation 
Fuel.--
          (1) * * *

           *       *       *       *       *       *       *

          [(3) Refund of certain taxes on fuel used in diesel-
        powered trains.--For purposes of this subsection, the 
        term ``nontaxable use'' includes fuel used in a diesel-
        powered train. The preceding sentence shall not apply 
        with respect to--
                  [(A) the Leaking Underground Storage Tank 
                Trust Fund financing rate under sections 4041 
                and 4081, and
                  [(B) so much of the rate specified in section 
                4081(a)(2)(A) as does not exceed--
                          [(i) 6.8 cents per gallon after 
                        September 30, 1993, and before October 
                        1, 1995,
                          [(ii) 5.55 cents per gallon after 
                        September 30, 1995, and before November 
                        1, 1998, and
                          [(iii) 4.3 cents per gallon after 
                        October 31, 1998.
                The preceding sentence shall not apply in the 
                case of fuel sold for exclusive use by a State 
                or any political subdivision thereof.]
          (3) Refund of certain taxes on fuel used in diesel-
        powered trains.--For purposes of this subsection, the 
        term ``nontaxable use'' includes fuel used in a diesel-
        powered train. The preceding sentence shall not apply 
        to the tax imposed by section 4041(d) and the Leaking 
        Underground Storage Tank Trust Fund financing rate 
        under section 4081 except with respect to fuel sold for 
        exclusive use by a State or any political subdivision 
        thereof.

           *       *       *       *       *       *       *

                                  
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