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[107th Congress Public Law 90]
[From the U.S. Government Printing Office]

<DOC>
[DOCID: f:publ090.107]

[[Page 877]]

       RAILROAD RETIREMENT AND SURVIVORS' IMPROVEMENT ACT OF 2001

[[Page 115 STAT. 878]]

Public Law 107-90
107th Congress

                                 An Act

 
  To modernize the financing of the railroad retirement system and to 
                                provide 
   enhanced benefits to employees and beneficiaries. <<NOTE: Dec. 21, 
                          2001 -  [H.R. 10]>> 

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress <<NOTE: Railroad Retirement and 
Survivors' Improvement Act of 2001.>> assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short <<NOTE: 45 USC 231t note.>> Title.--This Act may be cited 
as the ``Railroad Retirement and Survivors' Improvement Act of 2001''.

    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.

         TITLE I--AMENDMENTS TO RAILROAD RETIREMENT ACT OF 1974

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

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

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

         TITLE I--AMENDMENTS TO RAILROAD RETIREMENT ACT OF 1974

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

    (a) In General.--Section 4(g) of the Railroad Retirement Act of 1974 
(45 U.S.C. 231c(g)) is amended by adding at the end the following new 
subdivision:
    ``(10)(i) If for any month the unreduced annuity provided under this 
section for a widow or widower is less than the widow's or widower's 
initial minimum amount computed pursuant to paragraph (ii) of this 
subdivision, the unreduced annuity shall be increased to that initial 
minimum amount. For the purposes of this subdivision, the unreduced 
annuity is the annuity without regard to any deduction on account of 
work, without regard to any reduction for entitlement to an annuity 
under section 2(a)(1) of this Act, without regard to any reduction for 
entitlement to

[[Page 115 STAT. 879]]

a benefit under title II of the Social Security Act, and without regard 
to any reduction for entitlement to a public service pension pursuant to 
section 202(e)(7), 202(f)(2), or 202(g)(4) of the Social Security Act.
    ``(ii) For the purposes of this subdivision, the widow or widower's 
initial minimum amount is the amount of the unreduced annuity computed 
at the time an annuity is awarded to that widow or widower, except 
that--
            ``(A) in subsection (g)(1)(i) `100 per centum' shall be 
        substituted for `50 per centum'; and
            ``(B) in subsection (g)(2)(ii) `130 per centum' shall be 
        substituted for `80 per centum' both places it appears.

    ``(iii) If a widow or widower who was previously entitled to a 
widow's or widower's annuity under section 2(d)(1)(ii) of this Act 
becomes entitled to a widow's or widower's annuity under section 
2(d)(1)(i) of this Act, a new initial minimum amount shall be computed 
at the time of award of the widow's or widower's annuity under section 
2(d)(1)(i) of this Act.''.
    (b) Effective <<NOTE: 45 USC 231c note.>> Date.--
            (1) In <<NOTE: Applicability.>> general.--The amendment made 
        by this section shall take effect on the first day of the first 
        month that begins more than 30 days after enactment, and shall 
        apply to annuity amounts accruing for months after the effective 
        date in the case of annuities awarded--
                    (A) on or after that date; and
                    (B) before that date, but only if the annuity amount 
                under section 4(g) of the Railroad Retirement Act of 
                1974 (45 U.S.C. 231c(g)) was computed under such 
                section, as amended by the Omnibus Budget Reconciliation 
                Act of 1981 (Public Law 97-35; 95 Stat. 357).
            (2) Special rule for annuities awarded before the effective 
        date.--In applying the amendment made by this section to 
        annuities awarded before the effective date, the calculation of 
        the initial minimum amount under new section 4(g)(10)(ii) of the 
        Railroad Retirement Act of 1974 (45 U.S.C. 231c(g)(10)(ii)), as 
        added by subsection (a), shall be made as of the date of the 
        award of the widow's or widower's annuity.

SEC. 102. RETIREMENT AGE RESTORATION.

    (a) Employee Annuities.--Section 3(a)(2) of the Railroad Retirement 
Act of 1974 (45 U.S.C. 231b(a)(2)) is amended by inserting after ``(2)'' 
the following new sentence: ``For purposes of this subsection, 
individuals entitled to an annuity under section 2(a)(1)(ii) of this Act 
shall, except for the purposes of recomputations in accordance with 
section 215(f) of the Social Security Act, be deemed to have attained 
retirement age (as defined by section 216(l) of the Social Security 
Act).''.
    (b) Spouse and Survivor Annuities.--Section 4(a)(2) of the Railroad 
Retirement Act of 1974 (45 U.S.C. 231c(a)(2)) is amended by striking 
``if an'' and all that follows through ``section 2(c)(1) of this Act'' 
and inserting ``a spouse entitled to an annuity under section 
2(c)(1)(ii)(B) of this Act''.
    (c) Conforming Repeals.--Sections 3(a)(3), 4(a)(3), and 4(a)(4) of 
the Railroad Retirement Act of 1974 (45 U.S.C. 231b(a)(3), 231c(a)(3), 
and 231c(a)(4)) are repealed.
    (d) Effective <<NOTE: 45 USC 231c note.>> Dates.--

[[Page 115 STAT. 880]]

            (1) Generally.--Except <<NOTE: Applicability.>> as provided 
        in paragraph (2), the amendments made by this section shall 
        apply to annuities that begin to accrue on or after January 1, 
        2002.
            (2) Exception.--The amount of the annuity provided for a 
        spouse under section 4(a) of the Railroad Retirement Act of 1974 
        (45 U.S.C. 231c(a)) shall be computed under section 4(a)(3) of 
        such Act, as in effect on December 31, 2001, if the annuity 
        amount provided under section 3(a) of such Act (45 U.S.C. 
        231b(a)) for the individual on whose employment record the 
        spouse annuity is based was computed under section 3(a)(3) of 
        such Act, as in effect on December 31, 2001.

SEC. 103. VESTING REQUIREMENT.

    (a) Certain Annuities for Individuals.--Section 2(a) of the Railroad 
Retirement Act of 1974 (45 U.S.C. 231a(a)) is amended--
            (1) by inserting in subdivision (1) ``(or, for purposes of 
        paragraphs (i), (iii), and (v), five years of service, all of 
        which accrues after December 31, 1995)'' after ``ten years of 
        service''; and
            (2) by adding at the end the following new subdivision:

    ``(4) An individual who is entitled to an annuity under paragraph 
(v) of subdivision (1), but who does not have at least ten years of 
service, shall, prior to the month in which the individual attains age 
62, be entitled only to an annuity amount computed under section 3(a) of 
this Act (without regard to section 3(a)(2) of this Act) or section 
3(f)(3) of this Act. Upon attainment of age 62, such an individual may 
also be entitled to an annuity amount computed under section 3(b), but 
such annuity amount shall be reduced for early retirement in the same 
manner as if the individual were entitled to an annuity under section 
2(a)(1)(iii).''.
    (b) Computation Rule for Individuals' Annuities.--Section 3(a) of 
the Railroad Retirement Act of 1974 (45 U.S.C. 231b(a)), as amended by 
section 102 of this Act, is further amended by adding at the end the 
following new subdivision:
    ``(3) If an individual entitled to an annuity under section 
2(a)(1)(i) or (iii) of this Act on the basis of less than ten years of 
service is entitled to a benefit under section 202(a), section 202(b), 
or section 202(c) of the Social Security Act which began to accrue 
before the annuity under section 2(a)(1)(i) or (iii) of this Act, the 
annuity amount provided such individual under this subsection, shall be 
computed as though the annuity under this Act began to accrue on the 
later of (A) the date on which the benefit under section 202(a), section 
202(b), or section 202(c) of the Social Security Act began, or (B) the 
date on which the individual first met the conditions for entitlement to 
an age reduced annuity under this Act other than the conditions set 
forth in sections 2(e)(1) and 2(e)(2) of this Act and the requirement 
that an application be filed.''.
    (c) Survivors' Annuities.--Section 2(d)(1) of the Railroad 
Retirement Act of 1974 (45 U.S.C. 231a(d)(1)) is amended by inserting 
``(or five years of service, all of which accrues after December 31, 
1995)'' after ``ten years of service''.
    (d) Limitation on Annuity Amounts.--Section 2 of the Railroad 
Retirement Act of 1974 (45 U.S.C. 231a) is amended by adding at the end 
the following new subsection:
    ``(i) An individual entitled to an annuity under this section who 
has completed five years of service, all of which accrues after

[[Page 115 STAT. 881]]

1995, but who has not completed ten years of service, and the spouse, 
divorced spouse, and survivors of such individual, shall not be entitled 
to an annuity amount provided under section 3(a), section 4(a), or 
section 4(f) of this Act unless the individual, or the individual's 
spouse, divorced spouse, or survivors, would be entitled to a benefit 
under title II of the Social Security Act on the basis of the 
individual's employment record under both this Act and title II of the 
Social Security Act.''.
    (e) Computation Rule for Spouses' Annuities.--Section 4(a) of the 
Railroad Retirement Act of 1974 (45 U.S.C. 231c(a)), as amended by 
section 102 of this Act, is further amended by adding at the end the 
following new subdivision:
    ``(3) If a spouse entitled to an annuity under section 
2(c)(1)(ii)(A), section 2(c)(1)(ii)(C), or section 2(c)(2) of this Act 
or a divorced spouse entitled to an annuity under section 2(c)(4) of 
this Act on the basis of the employment record of an employee who will 
have completed less than 10 years of service is entitled to a benefit 
under section 202(a), section 202(b), or section 202(c) of the Social 
Security Act which began to accrue before the annuity under section 
2(c)(1)(ii)(A), section 2(c)(1)(ii)(C), section 2(c)(2), or section 
2(c)(4) of this Act, the annuity amount provided under this subsection 
shall be computed as though the annuity under this Act began to accrue 
on the later of (A) the date on which the benefit under section 202(a), 
section 202(b), or section 202(c) of the Social Security Act began or 
(B) the first date on which the annuitant met the conditions for 
entitlement to an age reduced annuity under this Act other than the 
conditions set forth in sections 2(e)(1) and 2(e)(2) of this Act and the 
requirement that an application be filed.''.
    (f)  Application Deeming Provision.--Section 5(b) of the Railroad 
Retirement Act of 1974 (45 U.S.C. 231d(b)) is amended by striking the 
second sentence and inserting the following new sentence: ``An 
application filed with the Board for an employee annuity, spouse 
annuity, or divorced spouse annuity on the basis of the employment 
record of an employee who will have completed less than ten years of 
service shall be deemed to be an application for any benefit to which 
such applicant may be entitled under this Act or section 202(a), section 
202(b), or section 202(c) of the Social Security Act. An application 
filed with the Board for an annuity on the basis of the employment 
record of an employee who will have completed ten years of service 
shall, unless the applicant specified otherwise, be deemed to be an 
application for any benefit to which such applicant may be entitled 
under this Act or title II of the Social Security Act.''.
    (g) Crediting Service Under the Social Security Act.--Section 18(2) 
of the Railroad Retirement Act of 1974 (45 U.S.C. 231q(2)) is amended--
            (1) by inserting ``(or less than five years of service, all 
        of which accrues after December 31, 1995)'' after ``ten years of 
        service'' every place it appears; and
            (2) by inserting ``(or five or more years of service, all of 
        which accrues after December 31, 1995)'' after ``ten or more 
        years of service''.

    (h) Automatic Benefit Eligibility Adjustments.--Section 19 of the 
Railroad Retirement Act of 1974 (45 U.S.C. 231r) is amended--

[[Page 115 STAT. 882]]

            (1) by inserting ``(or five or more years of service, all of 
        which accrues after December 31, 1995)'' after ``ten years of 
        service'' in subsection (c); and
            (2) by inserting ``(or five or more years of service, all of 
        which accrues after December 31, 1995)'' after ``ten years of 
        service'' in subsection (d)(2).

    (i) Conforming Amendments.--
            (1) Section 6(e)(1) of the Railroad Retirement Act of 1974 
        (45 U.S.C. 231e(1)) is amended by inserting ``(or five or more 
        years of service, all of which accrues after December 31, 
        1995)'' after ``ten years of service''.
            (2) Section 7(b)(2)(A) of the Railroad Retirement Act of 
        1974 (45 U.S.C. 231f(b)(2)(A)) is amended by inserting ``(or 
        five or more years of service, all of which accrues after 
        December 31, 1995)'' after ``ten years of service''.
            (3) Section 205(i) of the Social Security Act (42 U.S.C. 
        405(i)) is amended by inserting ``(or five or more years of 
        service, all of which accrues after December 31, 1995)'' after 
        ``ten years of service''.
            (4) Section 6(b)(2) of the Railroad Retirement Act of 1974 
        (45 U.S.C. 231e(b)(2)) is amended by inserting ``(or five or 
        more years of service, all of which accrues after December 31, 
        1995)'' after ``ten years of service'' the second place it 
        appears.

    (j) Effective <<NOTE: 42 USC 405 note.>> Date.--The amendments made 
by this section shall take effect on January 1, 2002.

SEC. 104. REPEAL OF RAILROAD RETIREMENT MAXIMUM.

    (a) Employee Annuities.--
            (1) In general.--Section 3(f) of the Railroad Retirement Act 
        of 1974 (45 U.S.C. 231b(f)) is amended--
                    (A) by striking subdivision (1); and
                    (B) by redesignating subdivisions (2) and (3) as 
                subdivisions (1) and (2), respectively.
            (2) Conforming amendments.--
                    (A) The first sentence of section 3(f)(1) of the 
                Railroad Retirement Act of 1974 (45 U.S.C. 231b(f)(1)), 
                as redesignated by paragraph (1)(B), is amended by 
                striking ``, without regard to the provisions of 
                subdivision (1) of this subsection,''.
                    (B) Paragraphs (i) and (ii) of section 7(d)(2) of 
                the Railroad Retirement Act of 1974 (45 U.S.C. 
                231f(d)(2)) are each amended by striking ``section 
                3(f)(3)'' and inserting ``section 3(f)(2)''.

    (b) Spouse and Survivor Annuities.--Section 4 of the Railroad 
Retirement Act of 1974 (45 U.S.C. 231c) is amended by striking 
subsection (c).
    (c) Effective <<NOTE: Applicability. 45 USC 231b note.>> Date.--The 
amendments made by this section shall take effect on January 1, 2002, 
and shall apply to annuity amounts accruing for months after December 
2001.

SEC. 105. INVESTMENT OF RAILROAD RETIREMENT ASSETS.

    (a) Establishment of National Railroad Retirement Investment 
Trust.--Section 15 of the Railroad Retirement Act of 1974 (45 U.S.C. 
231n) is amended by inserting after subsection (i) the following new 
subsection:
    ``(j) National Railroad Retirement Investment Trust.--

[[Page 115 STAT. 883]]

            ``(1) Establishment.--The National Railroad Retirement 
        Investment Trust (hereinafter in this subsection referred to as 
        the `Trust') is hereby established as a trust domiciled in the 
        District of Columbia and shall, to the extent not inconsistent 
        with this Act, be subject to the laws of the District of 
        Columbia applicable to such trusts. The Trust shall manage and 
        invest its assets in the manner set forth in this subsection.
            ``(2) Not a federal agency or instrumentality.--The Trust is 
        not a department, agency, or instrumentality of the Government 
        of the United States and shall not be subject to title 31, 
        United States Code.
            ``(3) Board of trustees.--
                    ``(A) Generally.--
                          ``(i) Membership.--The Trust shall have a 
                      Board of Trustees, consisting of 7 members. Three 
                      shall represent the interests of labor, 3 shall 
                      represent the interests of management, and 1 shall 
                      be an independent Trustee. The members of the 
                      Board of Trustees shall not be considered officers 
                      or employees of the Government of the United 
                      States.
                          ``(ii) Selection.--
                                    ``(I) The 3 members representing the 
                                interests of labor shall be selected by 
                                the joint recommendation of labor 
                                organizations, national in scope, 
                                organized in accordance with section 2 
                                of the Railway Labor Act, and 
                                representing at least \2/3\ of all 
                                active employees, represented by such 
                                national labor organizations, covered 
                                under this Act.
                                    ``(II) The 3 members representing 
                                the interests of management shall be 
                                selected by the joint recommendation of 
                                carriers as defined in section 1 of the 
                                Railway Labor Act employing at least \2/
                                3\ of all active employees covered under 
                                this Act.
                                    ``(III) The independent member shall 
                                be selected by a majority of the other 6 
                                members of the Board of Trustees.
                      A member of the Board of Trustees may be removed 
                      in the same manner and by the same constituency 
                      that selected that member.
                          ``(iii) Dispute resolution.--In the event that 
                      the parties specified in subclause (I), (II), or 
                      (III) of the previous clause cannot agree on the 
                      selection of Trustees within 60 days of the date 
                      of enactment or 60 days from any subsequent date 
                      that a position of the Board of Trustees becomes 
                      vacant, an impartial umpire to decide such dispute 
                      shall, on the petition of a party to the dispute, 
                      be appointed by the District Court of the United 
                      States for the District of Columbia.
                    ``(B) Qualifications.--Members of the Board of 
                Trustees shall be appointed only from among persons who 
                have experience and expertise in the management of 
                financial investments and pension plans. No member of 
                the Railroad Retirement Board shall be eligible to be a 
                member of the Board of Trustees.
                    ``(C) Terms.--Except as provided in this 
                subparagraph, each member shall be appointed for a 3-
                year term. The initial members appointed under this 
                paragraph shall be

[[Page 115 STAT. 884]]

                divided into equal groups so nearly as may be, of which 
                one group will be appointed for a 1-year term, one for a 
                2-year term, and one for a 3-year term. The Trustee 
                initially selected pursuant to clause (ii)(III) shall be 
                appointed to a 3-year term. A vacancy in the Board of 
                Trustees shall not affect the powers of the Board of 
                Trustees and shall be filled in the same manner as the 
                selection of the member whose departure caused the 
                vacancy. Upon the expiration of a term of a member of 
                the Board of Trustees, that member shall continue to 
                serve until a successor is appointed.
            ``(4) Powers of the board of trustees.--The Board of 
        Trustees shall--
                    ``(A) retain independent advisers to assist it in 
                the formulation and adoption of its investment 
                guidelines;
                    ``(B) retain independent investment managers to 
                invest the assets of the Trust in a manner consistent 
                with such investment guidelines;
                    ``(C) invest assets in the Trust, pursuant to the 
                policies adopted in subparagraph (A);
                    ``(D) pay administrative expenses of the Trust from 
                the assets in the Trust; and
                    ``(E) transfer money to the disbursing agent or as 
                otherwise provided in section 7(b)(4), to pay benefits 
                payable under this Act from the assets of the Trust.
            ``(5) Reporting requirements and fiduciary standards.--The 
        following reporting requirements and fiduciary standards shall 
        apply with respect to the Trust:
                    ``(A) Duties of the board of trustees.--The Trust 
                and each member of the Board of Trustees shall discharge 
                their duties (including the voting of proxies) with 
                respect to the assets of the Trust solely in the 
                interest of the Railroad Retirement Board and through 
                it, the participants and beneficiaries of the programs 
                funded under this Act--
                          ``(i) for the exclusive purpose of--
                                    ``(I) providing benefits to 
                                participants and their beneficiaries; 
                                and
                                    ``(II) defraying reasonable expenses 
                                of administering the functions of the 
                                Trust;
                          ``(ii) with the care, skill, prudence, and 
                      diligence under the circumstances then prevailing 
                      that a prudent person acting in a like capacity 
                      and familiar with such matters would use in the 
                      conduct of an enterprise of a like character and 
                      with like aims;
                          ``(iii) by diversifying investments so as to 
                      minimize the risk of large losses and to avoid 
                      disproportionate influence over a particular 
                      industry or firm, unless under the circumstances 
                      it is clearly prudent not to do so; and
                          ``(iv) in accordance with Trust governing 
                      documents and instruments insofar as such 
                      documents and instruments are consistent with this 
                      Act.
                    ``(B) Prohibitions with respect to members of the 
                board of trustees.--No member of the Board of Trustees 
                shall--
                          ``(i) deal with the assets of the Trust in the 
                      trustee's own interest or for the trustee's own 
                      account;

[[Page 115 STAT. 885]]

                          ``(ii) in an individual or in any other 
                      capacity act in any transaction involving the 
                      assets of the Trust on behalf of a party (or 
                      represent a party) whose interests are adverse to 
                      the interests of the Trust, the Railroad 
                      Retirement Board, or the interests of participants 
                      or beneficiaries; or
                          ``(iii) receive any consideration for the 
                      trustee's own personal account from any party 
                      dealing with the assets of the Trust.
                    ``(C) Exculpatory provisions and insurance.--Any 
                provision in an agreement or instrument that purports to 
                relieve a trustee from responsibility or liability for 
                any responsibility, obligation, or duty under this Act 
                shall be void: Provided, however, That nothing shall 
                preclude--
                          ``(i) the Trust from purchasing insurance for 
                      its trustees or for itself to cover liability or 
                      losses occurring by reason of the act or omission 
                      of a trustee, if such insurance permits recourse 
                      by the insurer against the trustee in the case of 
                      a breach of a fiduciary obligation by such 
                      trustee;
                          ``(ii) a trustee from purchasing insurance to 
                      cover liability under this section from and for 
                      his own account; or
                          ``(iii) an employer or an employee 
                      organization from purchasing insurance to cover 
                      potential liability of one or more trustees with 
                      respect to their fiduciary responsibilities, 
                      obligations, and duties under this section.
                    ``(D) Bonding.--Every trustee and every person who 
                handles funds or other property of the Trust (hereafter 
                in this subsection referred to as `Trust official') 
                shall be bonded. Such bond shall provide protection to 
                the Trust against loss by reason of acts of fraud or 
                dishonesty on the part of any Trust official, directly 
                or through the connivance of others, and shall be in 
                accordance with the following:
                          ``(i) The amount of such bond shall be fixed 
                      at the beginning of each fiscal year of the Trust 
                      by the Railroad Retirement Board. Such amount 
                      shall not be less than 10 percent of the amount of 
                      the funds handled. In no case shall such bond be 
                      less than $1,000 nor more than $500,000, except 
                      that the Railroad Retirement Board, after 
                      consideration of the record, may prescribe an 
                      amount in excess of $500,000, subject to the 10 
                      per centum limitation of the preceding sentence.
                          ``(ii) It shall be unlawful for any Trust 
                      official to receive, handle, disburse, or 
                      otherwise exercise custody or control of any of 
                      the funds or other property of the Trust without 
                      being bonded as required by this subsection and it 
                      shall be unlawful for any Trust official, or any 
                      other person having authority to direct the 
                      performance of such functions, to permit such 
                      functions, or any of them, to be performed by any 
                      Trust official, with respect to whom the 
                      requirements of this subsection have not been met.
                          ``(iii) It shall be unlawful for any person to 
                      procure any bond required by this subsection from 
                      any surety

[[Page 115 STAT. 886]]

                      or other company or through any agent or broker in 
                      whose business operations such person has any 
                      control or significant financial interest, direct 
                      or indirect.
                    ``(E) Audit and report.--
                          ``(i) The Trust shall annually engage an 
                      independent qualified public accountant to audit 
                      the financial statements of the Trust.
                          ``(ii) <<NOTE: Deadline.>> The Trust shall 
                      submit an annual management report to the Congress 
                      not later than 180 days after the end of the 
                      Trust's fiscal year. A management report under 
                      this subsection shall include--
                                    ``(I) a statement of financial 
                                position;
                                    ``(II) a statement of operations;
                                    ``(III) a statement of cash flows;
                                    ``(IV) a statement on internal 
                                accounting and administrative control 
                                systems;
                                    ``(V) the report resulting from an 
                                audit of the financial statements of the 
                                Trust conducted under clause (i); and
                                    ``(VI) any other comments and 
                                information necessary to inform the 
                                Congress about the operations and 
                                financial condition of the Trust.
                          ``(iii) The Trust shall provide the President, 
                      the Railroad Retirement Board, and the Director of 
                      the Office of Management and Budget a copy of the 
                      management report when it is submitted to 
                      Congress.
                    ``(F) Enforcement.--The Railroad Retirement Board 
                may bring a civil action--
                          ``(i) to enjoin any act or practice by the 
                      Trust, its Board of Trustees, or its employees or 
                      agents that violates any provision of this Act; or
                          ``(ii) to obtain other appropriate relief to 
                      redress such violations, or to enforce any 
                      provisions of this Act.
            ``(6) Rules and administrative powers.--The Board of 
        Trustees shall have the authority to make rules to govern its 
        operations, employ professional staff, and contract with outside 
        advisers, including the Railroad Retirement Board, to provide 
        legal, accounting, investment advisory, or other services 
        necessary for the proper administration of this subsection. In 
        the case of contracts with investment advisory services, 
        compensation for such services may be on a fixed contract fee 
        basis or on such other terms and conditions as are customary for 
        such services.
            ``(7) Quorum.--Five members of the Board of Trustees 
        constitute a quorum to do business. Investment guidelines must 
        be adopted by a unanimous vote of the entire Board of Trustees. 
        All other decisions of the Board of Trustees shall be decided by 
        a majority vote of the quorum present. All decisions of the 
        Board of Trustees shall be entered upon the records of the Board 
        of Trustees.
            ``(8) Funding.--The expenses of the Trust and the Board of 
        Trustees incurred under this subsection shall be paid from the 
        Trust.''.

    (b) Conforming and Technical Amendments Governing Investments.--
Section 15(e) of the Railroad Retirement Act of 1974 (45 U.S.C. 231n(e)) 
is amended--

[[Page 115 STAT. 887]]

            (1) in the first sentence, by striking ``, the Dual Benefits 
        Payments Account'' and all that follows through ``may be made 
        only'' in the second sentence and inserting ``and the Dual 
        Benefits Payments Account as are not transferred to the National 
        Railroad Retirement Investment Trust as the Board may 
        determine'';
            (2) by striking ``the Second Liberty Bond Act, as amended'' 
        and inserting ``chapter 31 of title 31''; and
            (3) by striking ``the foregoing requirements'' and inserting 
        ``the requirements of this subsection''.

    (c) Means <<NOTE: 45 USC 231n note.>> of Financing.--For all 
purposes of the Congressional Budget Act of 1974, the Balanced Budget 
and Emergency Deficit Control Act of 1985, and chapter 11 of title 31, 
United States Code, and notwithstanding section 20 of the Office of 
Management and Budget Circular No. A-11, the purchase or sale of non-
Federal assets (other than gains or losses from such transactions) by 
the National Railroad Retirement Investment Trust shall be treated as a 
means of financing.

    (d) Effective <<NOTE: 45 USC 231n note.>> Date.--The amendments made 
by this section shall take effect on the first day of the month that 
begins more than 30 days after enactment.

SEC. 106. ELIMINATION OF SUPPLEMENTAL ANNUITY ACCOUNT.

    (a) Source of Payments.--Section 7(c)(1) of the Railroad Retirement 
Act of 1974 (45 U.S.C. 231f(c)(1)) is amended by striking ``payments of 
supplemental annuities under section 2(b) of this Act shall be made from 
the Railroad Retirement Supplemental Account, and''.
    (b) Elimination of Account.--Section 15(c) of the Railroad 
Retirement Act of 1974 (45 U.S.C. 231n(c)) is repealed.
    (c) Amendment to Railroad Retirement Account.--Section 15(a) of the 
Railroad Retirement Act of 1974 (45 U.S.C. 231n(a)) is amended by 
striking ``, except those portions of the amounts covered into the 
Treasury under sections 3211(b),'' and all that follows through the end 
of the subsection and inserting a period.
    (d) <<NOTE: 45 USC 231n note.>> Transfer.--
            (1) Determination.--As soon as possible after December 31, 
        2001, the Railroad Retirement Board shall--
                    (A) determine the amount of funds in the Railroad 
                Retirement Supplemental Account under section 15(c) of 
                the Railroad Retirement Act of 1974 (45 U.S.C. 231n(c)) 
                as of the date of such determination; and
                    (B) direct the Secretary of the Treasury to transfer 
                such funds to the National Railroad Retirement 
                Investment Trust under section 15(j) of such Act (as 
                added by section 105).
            (2) Transfer by the secretary of the treasury.--The 
        Secretary of the Treasury shall make the transfer described in 
        paragraph (1).

    (e) Effective <<NOTE: 45 USC 231n note.>> Date.--
            (1) In general.--Subject to paragraph (2), the amendments 
        made by subsections (a), (b), and (c) shall take effect January 
        1, 2002.
            (2) Account in existence until transfer made.--The Railroad 
        Retirement Supplemental Account under section 15(c) of the 
        Railroad Retirement Act of 1974 (45 U.S.C. 231n(c))

[[Page 115 STAT. 888]]

        shall continue to exist until the date that the Secretary of the 
        Treasury makes the transfer described in subsection (d)(2).

SEC. 107. TRANSFER AUTHORITY REVISIONS.

    (a) Railroad Retirement Account.--Section 15 of the Railroad 
Retirement Act of 1974 (45 U.S.C. 231n) is amended by adding after 
subsection (j) the following new subsection:
    ``(k) Transfers to the Trust.--The Board shall, upon establishment 
of the National Railroad Retirement Investment Trust and from time to 
time thereafter, direct the Secretary of the Treasury to transfer, in 
such manner as will maximize the investment returns to the Railroad 
Retirement system, that portion of the Railroad Retirement Account that 
is not needed to pay current administrative expenses of the Board to the 
National Railroad Retirement Investment Trust. The Secretary shall make 
that transfer.''.
    (b) Transfers From the National Railroad Retirement Investment 
Trust.--Section 15 of the Railroad Retirement Act of 1974 (45 U.S.C. 
231n), as amended by subsection (a), is further amended by adding after 
subsection (k) the following new subsection:
    ``(l) National Railroad Retirement Investment Trust.--The National 
Railroad Retirement Investment Trust shall from time to time transfer to 
the disbursing agent described in section 7(b)(4) or as otherwise 
directed by the Railroad Retirement Board pursuant to section 7(b)(4), 
such amounts as may be necessary to pay benefits under this Act (other 
than benefits paid from the Social Security Equivalent Benefit Account 
or the Dual Benefit Payments Account).''.
    (c) Social Security Equivalent Benefit Account.--
            (1) Transfers to trust.--Section 15A(d)(2) of the Railroad 
        Retirement Act of 1974 (45 U.S.C. 231n-1(d)(2)) is amended to 
        read as follows:

    ``(2) Upon establishment of the National Railroad Retirement 
Investment Trust and from time to time thereafter, the Board shall 
direct the Secretary of the Treasury to transfer, in such manner as will 
maximize the investment returns to the Railroad Retirement system, the 
balance of the Social Security Equivalent Benefit Account not needed to 
pay current benefits and administrative expenses required to be paid 
from that Account to the National Railroad Retirement Investment Trust, 
and the Secretary shall make that transfer. Any balance transferred 
under this paragraph shall be used by the National Railroad Retirement 
Investment Trust only to pay benefits under this Act or to purchase 
obligations of the United States that are backed by the full faith and 
credit of the United States pursuant to chapter 31 of title 31, United 
States Code. The proceeds of sales of, and the interest income from, 
such obligations shall be used by the Trust only to pay benefits under 
this Act.''.
            (2) Transfers to disbursing agent.--Section 15A(c)(1) of the 
        Railroad Retirement Act of 1974 (45 U.S.C. 231n-1(c)(1)) is 
        amended by adding at the end the following new sentence: ``The 
        Secretary shall from time to time transfer to the disbursing 
        agent under section 7(b)(4) amounts necessary to pay those 
        benefits.''.

[[Page 115 STAT. 889]]

            (3) Conforming amendment.--Section 15A(d)(1) of the Railroad 
        Retirement Act of 1974 (45 U.S.C. 231n-1(d)(1)) is amended by 
        striking the second and third sentences.

    (d) Dual Benefits Payments Account.--Section 15(d)(1) of the 
Railroad Retirement Act of 1974 (45 U.S.C. 231n(d)(1)) is amended by 
adding at the end the following new sentence: ``The Secretary of the 
Treasury shall from time to time transfer from the Dual Benefits 
Payments Account to the disbursing agent under section 7(b)(4) amounts 
necessary to pay benefits payable from that Account.''.
    (e) Certification by the Board and Payment.--Paragraph (4) of 
section 7(b) of the Railroad Retirement Act of 1974 (45 U.S.C. 
231f(b)(4)) is amended to read as follows:
    ``(4)(A) The Railroad Retirement Board, after consultation with the 
Board of Trustees of the National Railroad Retirement Investment Trust 
and the Secretary of the Treasury, shall enter into an arrangement with 
a nongovernmental financial institution to serve as disbursing agent for 
benefits payable under this Act who shall disburse consolidated benefits 
under this Act to each recipient. Pending the taking effect of that 
arrangement, benefits shall be paid as under the law in effect prior to 
the enactment of the Railroad Retirement and Survivors' Improvement Act 
of 2001.
    ``(B) <<NOTE: Certification.>> The Board shall from time to time 
certify--
            ``(i) to the Secretary of the Treasury the amounts required 
        to be transferred from the Social Security Equivalent Benefit 
        Account and the Dual Benefits Payments Account to the disbursing 
        agent to make payments of benefits and the Secretary of the 
        Treasury shall transfer those amounts;
            ``(ii) to the Board of Trustees of the National Railroad 
        Retirement Investment Trust the amounts required to be 
        transferred from the National Railroad Retirement Investment 
        Trust to the disbursing agent to make payments of benefits and 
        the Board of Trustees shall transfer those amounts; and
            ``(iii) to the disbursing agent the name and address of each 
        individual entitled to receive a payment, the amount of such 
        payment, and the time at which the payment should be made.''.

    (f) Benefit Payments.--Section 7(c)(1) of the Railroad Retirement 
Act of 1974 (45 U.S.C. 231f(c)(1)) is amended--
            (1) by striking ``from the Railroad Retirement Account'' and 
        inserting ``by the disbursing agent under subsection (b)(4) from 
        money transferred to it from the National Railroad Retirement 
        Investment Trust or the Social Security Equivalent Benefit 
        Account, as the case may be''; and
            (2) by inserting ``by the disbursing agent under subsection 
        (b)(4) from money transferred to it'' after ``Public Law 93-445 
        shall be made''.

    (g) Transitional <<NOTE: 45 USC 231n note.>> Rule for Existing 
Obligation.--In making transfers under sections 15(k) and 15A(d)(2) of 
the Railroad Retirement Act of 1974, as amended by subsections (a) and 
(c), respectively, the Railroad Retirement Board shall consult with the 
Secretary of the Treasury to design an appropriate method to transfer 
obligations held as of the date of enactment of this Act or to convert 
such obligations to cash at the discretion of the Railroad Retirement 
Board prior to transfer. The National Railroad Retirement Investment 
Trust may hold to maturity any obligations so

[[Page 115 STAT. 890]]

received or may redeem them prior to maturity, as the Trust deems 
appropriate.

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

    (a) Projections.--Section 22(a)(1) of the Railroad Retirement Act of 
1974 (45 U.S.C. 231u(a)(1)) is amended--
            (1) by inserting after the first sentence the following new 
        sentence: ``On or before May 1 of each year beginning in 2003, 
        the Railroad Retirement Board shall compute its projection of 
        the account benefits ratio and the average account benefits 
        ratio (as defined by section 3241(c) of the Internal Revenue 
        Code of 1986) for each of the next succeeding five fiscal 
        years.''; and
            (2) by striking ``the projection prepared pursuant to the 
        preceding sentence'' and inserting ``the projections prepared 
        pursuant to the preceding two sentences''.

    (b) Certifications.--The Railroad Retirement Act of 1974 (45 U.S.C. 
231 et seq.) is amended by adding at the end the following new section:

        ``computation and certification of account benefit ratios

    ``Sec. 23. <<NOTE: 45 USC 231v.>> (a) Initial Computation and 
Certification.--On or before November 1, 2003, the Railroad Retirement 
Board shall--
            ``(1) compute the account benefits ratios for each of the 
        most recent 10 preceding fiscal years, and
            ``(2) certify the account benefits ratios for each such 
        fiscal year to the Secretary of the Treasury.

    ``(b) Computations and Certifications After 2003.--On or before 
November 1 of each year after 2003, the Railroad Retirement Board 
shall--
            ``(1) compute the account benefits ratio for the fiscal year 
        ending in such year, and
            ``(2) certify the account benefits ratio for such fiscal 
        year to the Secretary of the Treasury.

    ``(c) Definition.--As used in this section, the term `account 
benefits ratio' has the meaning given that term in section 3241(c) of 
the Internal Revenue Code of 1986.''.

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

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

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

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

    Subsection (c) <<NOTE: 26 USC 501.>> of section 501 is amended by 
adding at the end the following new paragraph:
            ``(28) The National Railroad Retirement Investment Trust 
        established under section 15(j) of the Railroad Retirement Act 
        of 1974.''.

[[Page 115 STAT. 891]]

SEC. 203. REPEAL OF SUPPLEMENTAL ANNUITY TAX.

    (a) Repeal of Tax on Employee Representatives.--Section 3211 
is <<NOTE: 26 USC 3211.>> amended by striking subsection (b).

    (b) Repeal of Tax on Employers.--Section 3221 <<NOTE: 26 USC 
3221.>> is amended by striking subsections (c) and (d) and by 
redesignating subsection (e) as subsection (c).

    (c) Effective <<NOTE: Applicability. 26 USC 3211 note.>> Date.--The 
amendments made by this section shall apply to calendar years beginning 
after December 31, 2001.

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

    (a) Rate of Tax on Employers.--Subsection (b) of section 3221 is 
amended to read as follows:
    ``(b) Tier 2 Tax.--
            ``(1) In general.--In addition to other taxes, there is 
        hereby imposed on every employer an excise tax, with respect to 
        having individuals in his employ, equal to the applicable 
        percentage of the compensation paid during any calendar year by 
        such employer for services rendered to such employer.
            ``(2) Applicable percentage.--For purposes of paragraph (1), 
        the term `applicable percentage' means--
                    ``(A) 15.6 percent in the case of compensation paid 
                during 2002,
                    ``(B) 14.2 percent in the case of compensation paid 
                during 2003, and
                    ``(C) in the case of compensation paid during any 
                calendar year after 2003, the percentage determined 
                under section 3241 for such calendar year.''.

    (b) Rate of Tax on Employee Representatives.--Section 3211, as 
amended by section 203, is amended by striking subsection (a) and 
inserting the following new subsections:
    ``(a) Tier 1 Tax.--In addition to other taxes, there is hereby 
imposed on the income of each employee representative a tax equal to the 
applicable percentage of the compensation received during any calendar 
year by such employee representative for services rendered by such 
employee representative. For purposes of the preceding sentence, the 
term `applicable percentage' means the percentage equal to the sum of 
the rates of tax in effect under subsections (a) and (b) of section 3101 
and subsections (a) and (b) of section 3111 for the calendar year.
    ``(b) Tier 2 Tax.--
            ``(1) In general.--In addition to other taxes, there is 
        hereby imposed on the income of each employee representative a 
        tax equal to the applicable percentage of the compensation 
        received during any calendar year by such employee 
        representatives for services rendered by such employee 
        representative.
            ``(2) Applicable percentage.--For purposes of paragraph (1), 
        the term `applicable percentage' means--
                    ``(A) 14.75 percent in the case of compensation 
                received during 2002,
                    ``(B) 14.20 percent in the case of compensation 
                received during 2003, and
                    ``(C) in the case of compensation received during 
                any calendar year after 2003, the percentage determined 
                under section 3241 for such calendar year.

[[Page 115 STAT. 892]]

    ``(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 <<NOTE: 26 USC 3201.>> is amended to read as follows:

    ``(b) Tier 2 Tax.--
            ``(1) In general.--In addition to other taxes, there is 
        hereby imposed on the income of each employee a tax equal to the 
        applicable percentage of the compensation received during any 
        calendar year by such employee for services rendered by such 
        employee.
            ``(2) Applicable percentage.--For purposes of paragraph (1), 
        the term `applicable percentage' means--
                    ``(A) 4.90 percent in the case of compensation 
                received during 2002 or 2003, and
                    ``(B) in the case of compensation received during 
                any calendar year after 2003, the percentage determined 
                under section 3241 for such calendar year.''.

    (d) Determination <<NOTE: 26 USC 3241.>> of Rate.--Chapter 22 is 
amended by adding at the end the following new subchapter:

              ``Subchapter E--Tier 2 Tax Rate Determination

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

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

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

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

      

    ``(c) Definitions Related to Determination of Rates of Tax.--
            ``(1) Average account benefits ratio.--For purposes of this 
        section, the term `average account benefits ratio' means, with 
        respect to any calendar year, the average determined by the 
        Secretary of the account benefits ratios for the 10 most recent 
        fiscal years ending before such calendar year. If the

[[Page 115 STAT. 893]]

        amount determined under the preceding sentence is not a multiple 
        of 0.1, such amount shall be increased to the next highest 
        multiple of 0.1.
            ``(2) Account benefits ratio.--For purposes of this section, 
        the term `account benefits ratio' means, with respect to any 
        fiscal year, the amount determined by the Railroad Retirement 
        Board by dividing the fair market value of the assets in the 
        Railroad Retirement Account and of the National Railroad 
        Retirement Investment Trust (and for years before 2002, the 
        Social Security Equivalent Benefits Account) as of the close of 
        such fiscal year by the total benefits and administrative 
        expenses paid from the Railroad Retirement Account and the 
        National Railroad Retirement Investment Trust during such fiscal 
        year.

    ``(d) Notice.--No <<NOTE: Deadline. Federal Register, 
publication.>> 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) <<NOTE: 26 USC 24.>> is amended 
        by striking ``section 3211(a)(1)'' and inserting ``section 
        3211(a)''.
            (2) Section 72(r)(2)(B)(i) <<NOTE: 26 USC 72.>> is amended 
        by striking ``3211(a)(2)'' and inserting ``3211(b)''.
            (3) Paragraphs (2)(A)(iii)(II) and (4)(A) of <<NOTE: 26 USC 
        3231.>> section 3231(e) are amended by striking ``3211(a)(1)'' 
        and inserting ``3211(a)''.
            (4) Section 3231(e)(2)(B)(ii)(I) is amended by striking 
        ``3211(a)(2)'' and inserting ``3211(b)''.
            (5) The table of subchapters for chapter 22 is amended by 
        adding at the end the following new item:

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

    (f) Effective <<NOTE: Applicability. 26 USC 24 note.>> Date.--The 
amendments made by this section shall apply to calendar years beginning 
after December 31, 2001.

    Approved December 21, 2001.

LEGISLATIVE HISTORY--H.R. 10:
---------------------------------------------------------------------------

HOUSE REPORTS: No. 107-51, Pt. 1 (Comm. on Ways and Means) and Pt. 2 
(Comm. on Education and the Workforce).
CONGRESSIONAL RECORD, Vol. 147 (2001):
            May 2, considered and passed House.
            Nov. 29, Dec. 3-5, considered and passed Senate, amended.
            Dec. 11, House concurred in Senate amendments.

                                  <all>
```