PUBLIC LAW 107–90—DEC. 21, 2001

RAILROAD RETIREMENT AND SURVIVORS’

IMPROVEMENT ACT OF 2001

115 STAT. 878 PUBLIC LAW 107–90—DEC. 21, 2001

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.

Be it enacted by the Senate and House of Representatives of

the United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) SHORT TITLE.—This Act may be cited as the ‘‘Railroad

Retirement and Survivors’ Improvement Act of 2001’’.

(b) TABLE OF CONTENTS.—The table of contents for this Act

is as follows:

Sec. 1. Short title; table of contents.

TITLE I—AMENDMENTS TO RAILROAD RETIREMENT ACT OF 1974

Sec. 101. Expansion of widow’s and widower’s benefits.

Sec. 102. Retirement age restoration.

Sec. 103. Vesting requirement.

Sec. 104. Repeal of railroad retirement maximum.

Sec. 105. Investment of railroad retirement assets.

Sec. 106. Elimination of supplemental annuity account.

Sec. 107. Transfer authority revisions.

Sec. 108. Annual ratio projections and certifications by the Railroad Retirement

Board.

TITLE II—AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986

Sec. 201. Amendments to the Internal Revenue Code of 1986.

Sec. 202. Exemption from tax for National Railroad Retirement Investment Trust.

Sec. 203. Repeal of supplemental annuity tax.

Sec. 204. Employer, employee representative, and employee tier 2 tax rate adjustments.

TITLE I—AMENDMENTS TO RAILROAD

RETIREMENT ACT OF 1974

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

(a) IN GENERAL.—Section 4(g) of the Railroad Retirement Act

of 1974 (45 U.S.C. 231c(g)) is amended by adding at the end the

following new subdivision:

‘‘(10)(i) If for any month the unreduced annuity provided under

this section for a widow or widower is less than the widow’s or

widower’s initial minimum amount computed pursuant to paragraph (ii) of this subdivision, the unreduced annuity shall be

increased to that initial minimum amount. For the purposes of

this subdivision, the unreduced annuity is the annuity without

regard to any deduction on account of work, without regard to

any reduction for entitlement to an annuity under section 2(a)(1)

of this Act, without regard to any reduction for entitlement to

45 USC 231t

note.

Railroad

Retirement and

Survivors’

Improvement Act

of 2001.

Dec. 21, 2001

[H.R. 10]

PUBLIC LAW 107–90—DEC. 21, 2001 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 DATE.—

(1) IN GENERAL.—The amendment made by this section

shall take effect on the first day of the first month that begins

more than 30 days after enactment, and shall apply to annuity

amounts accruing for months after the effective date in the

case of annuities awarded—

(A) on or after that date; and

(B) before that date, but only if the annuity amount

under section 4(g) of the Railroad Retirement Act of 1974

(45 U.S.C. 231c(g)) was computed under such section, as

amended by the Omnibus Budget Reconciliation Act of

1981 (Public Law 97–35; 95 Stat. 357).

(2) SPECIAL RULE FOR ANNUITIES AWARDED BEFORE THE

EFFECTIVE DATE.—In applying the amendment made by this

section to annuities awarded before the effective date, the calculation of the initial minimum amount under new section

4(g)(10)(ii) of the Railroad Retirement Act of 1974 (45 U.S.C.

231c(g)(10)(ii)), as added by subsection (a), shall be made as

of the date of the award of the widow’s or widower’s annuity.

SEC. 102. RETIREMENT AGE RESTORATION.

(a) EMPLOYEE ANNUITIES.—Section 3(a)(2) of the Railroad

Retirement Act of 1974 (45 U.S.C. 231b(a)(2)) is amended by

inserting after ‘‘(2)’’ the following new sentence: ‘‘For purposes of

this subsection, individuals entitled to an annuity under section

2(a)(1)(ii) of this Act shall, except for the purposes of recomputations

in accordance with section 215(f) of the Social Security Act, be

deemed to have attained retirement age (as defined by section

216(l) of the Social Security Act).’’.

(b) SPOUSE AND SURVIVOR ANNUITIES.—Section 4(a)(2) of the

Railroad Retirement Act of 1974 (45 U.S.C. 231c(a)(2)) is amended

by striking ‘‘if an’’ and all that follows through ‘‘section 2(c)(1)

of this Act’’ and inserting ‘‘a spouse entitled to an annuity under

section 2(c)(1)(ii)(B) of this Act’’.

(c) CONFORMING REPEALS.—Sections 3(a)(3), 4(a)(3), and 4(a)(4)

of the Railroad Retirement Act of 1974 (45 U.S.C. 231b(a)(3),

231c(a)(3), and 231c(a)(4)) are repealed.

(d) EFFECTIVE DATES.— 45 USC 231c

note.

Applicability.

45 USC 231c

note.

115 STAT. 880 PUBLIC LAW 107–90—DEC. 21, 2001

(1) GENERALLY.—Except as provided in paragraph (2), the

amendments made by this section shall apply to annuities

that begin to accrue on or after January 1, 2002.

(2) EXCEPTION.—The amount of the annuity provided for

a spouse under section 4(a) of the Railroad Retirement Act

of 1974 (45 U.S.C. 231c(a)) shall be computed under section

4(a)(3) of such Act, as in effect on December 31, 2001, if the

annuity amount provided under section 3(a) of such Act (45

U.S.C. 231b(a)) for the individual on whose employment record

the spouse annuity is based was computed under section 3(a)(3)

of such Act, as in effect on December 31, 2001.

SEC. 103. VESTING REQUIREMENT.

(a) CERTAIN ANNUITIES FOR INDIVIDUALS.—Section 2(a) of the

Railroad Retirement Act of 1974 (45 U.S.C. 231a(a)) is amended— (1) by inserting in subdivision (1) ‘‘(or, for purposes of

paragraphs (i), (iii), and (v), five years of service, all of which

accrues after December 31, 1995)’’ after ‘‘ten years of service’’;

and

(2) by adding at the end the following new subdivision: ‘‘(4) An individual who is entitled to an annuity under paragraph (v) of subdivision (1), but who does not have at least ten

years of service, shall, prior to the month in which the individual

attains age 62, be entitled only to an annuity amount computed

under section 3(a) of this Act (without regard to section 3(a)(2)

of this Act) or section 3(f)(3) of this Act. Upon attainment of age

62, such an individual may also be entitled to an annuity amount

computed under section 3(b), but such annuity amount shall be

reduced for early retirement in the same manner as if the individual

were entitled to an annuity under section 2(a)(1)(iii).’’.

(b) COMPUTATION RULE FOR INDIVIDUALS’ ANNUITIES.—Section

3(a) of the Railroad Retirement Act of 1974 (45 U.S.C. 231b(a)),

as amended by section 102 of this Act, is further amended by

adding at the end the following new subdivision:

‘‘(3) If an individual entitled to an annuity under section

2(a)(1)(i) or (iii) of this Act on the basis of less than ten years

of service is entitled to a benefit under section 202(a), section

202(b), or section 202(c) of the Social Security Act which began

to accrue before the annuity under section 2(a)(1)(i) or (iii) of this

Act, the annuity amount provided such individual under this subsection, shall be computed as though the annuity under this Act

began to accrue on the later of (A) the date on which the benefit

under section 202(a), section 202(b), or section 202(c) of the Social

Security Act began, or (B) the date on which the individual first

met the conditions for entitlement to an age reduced annuity under

this Act other than the conditions set forth in sections 2(e)(1)

and 2(e)(2) of this Act and the requirement that an application

be filed.’’.

(c) SURVIVORS’ ANNUITIES.—Section 2(d)(1) of the Railroad

Retirement Act of 1974 (45 U.S.C. 231a(d)(1)) is amended by

inserting ‘‘(or five years of service, all of which accrues after

December 31, 1995)’’ after ‘‘ten years of service’’.

(d) LIMITATION ON ANNUITY AMOUNTS.—Section 2 of the Railroad Retirement Act of 1974 (45 U.S.C. 231a) is amended by adding

at the end the following new subsection:

‘‘(i) An individual entitled to an annuity under this section

who has completed five years of service, all of which accrues after

Applicability.

PUBLIC LAW 107–90—DEC. 21, 2001 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—

115 STAT. 882 PUBLIC LAW 107–90—DEC. 21, 2001

(1) by inserting ‘‘(or five or more years of service, all of

which accrues after December 31, 1995)’’ after ‘‘ten years of

service’’ in subsection (c); and

(2) by inserting ‘‘(or five or more years of service, all of

which accrues after December 31, 1995)’’ after ‘‘ten years of

service’’ in subsection (d)(2).

(i) CONFORMING AMENDMENTS.— (1) Section 6(e)(1) of the Railroad Retirement Act of 1974

(45 U.S.C. 231e(1)) is amended by inserting ‘‘(or five or more

years of service, all of which accrues after December 31, 1995)’’ after ‘‘ten years of service’’. (2) Section 7(b)(2)(A) of the Railroad Retirement Act of

1974 (45 U.S.C. 231f(b)(2)(A)) is amended by inserting ‘‘(or

five or more years of service, all of which accrues after

December 31, 1995)’’ after ‘‘ten years of service’’. (3) Section 205(i) of the Social Security Act (42 U.S.C.

405(i)) is amended by inserting ‘‘(or five or more years of

service, all of which accrues after December 31, 1995)’’ after ‘‘ten years of service’’. (4) Section 6(b)(2) of the Railroad Retirement Act of 1974

(45 U.S.C. 231e(b)(2)) is amended by inserting ‘‘(or five or

more years of service, all of which accrues after December

31, 1995)’’ after ‘‘ten years of service’’ the second place it

appears.

(j) EFFECTIVE DATE.—The amendments made by this section

shall take effect on January 1, 2002.

SEC. 104. REPEAL OF RAILROAD RETIREMENT MAXIMUM.

(a) EMPLOYEE ANNUITIES.—

(1) IN GENERAL.—Section 3(f) of the Railroad Retirement

Act of 1974 (45 U.S.C. 231b(f)) is amended—

(A) by striking subdivision (1); and

(B) by redesignating subdivisions (2) and (3) as subdivisions (1) and (2), respectively.

(2) CONFORMING AMENDMENTS.— (A) The first sentence of section 3(f)(1) of the Railroad

Retirement Act of 1974 (45 U.S.C. 231b(f)(1)), as redesignated by paragraph (1)(B), is amended by striking ‘‘, without regard to the provisions of subdivision (1) of this subsection,’’.

(B) Paragraphs (i) and (ii) of section 7(d)(2) of the

Railroad Retirement Act of 1974 (45 U.S.C. 231f(d)(2)) are

each amended by striking ‘‘section 3(f)(3)’’ and inserting

‘‘section 3(f)(2)’’.

(b) SPOUSE AND SURVIVOR ANNUITIES.—Section 4 of the Railroad Retirement Act of 1974 (45 U.S.C. 231c) is amended by striking

subsection (c).

(c) EFFECTIVE DATE.—The amendments made by this section

shall take effect on January 1, 2002, and shall apply to annuity

amounts accruing for months after December 2001.

SEC. 105. INVESTMENT OF RAILROAD RETIREMENT ASSETS.

(a) ESTABLISHMENT OF NATIONAL RAILROAD RETIREMENT

INVESTMENT TRUST.—Section 15 of the Railroad Retirement Act

of 1974 (45 U.S.C. 231n) is amended by inserting after subsection

(i) the following new subsection:

‘‘(j) NATIONAL RAILROAD RETIREMENT INVESTMENT TRUST.—

Applicability.

45 USC 231b

note.

42 USC 405 note.

PUBLIC LAW 107–90—DEC. 21, 2001 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

115 STAT. 884 PUBLIC LAW 107–90—DEC. 21, 2001

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;

PUBLIC LAW 107–90—DEC. 21, 2001 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

115 STAT. 886 PUBLIC LAW 107–90—DEC. 21, 2001

or other company or through any agent or broker in

whose business operations such person has any control

or significant financial interest, direct or indirect.

‘‘(E) AUDIT AND REPORT.— ‘‘(i) The Trust shall annually engage an independent qualified public accountant to audit the financial statements of the Trust. ‘‘(ii) The Trust shall submit an annual management report to the Congress not later than 180 days

after the end of the Trust’s fiscal year. A management

report under this subsection shall include— ‘‘(I) a statement of financial position;

‘‘(II) a statement of operations;

‘‘(III) a statement of cash flows;

‘‘(IV) a statement on internal accounting and

administrative control systems; ‘‘(V) the report resulting from an audit of the

financial statements of the Trust conducted under

clause (i); and ‘‘(VI) any other comments and information necessary to inform the Congress about the operations

and financial condition of the Trust.

‘‘(iii) The Trust shall provide the President, the

Railroad Retirement Board, and the Director of the

Office of Management and Budget a copy of the

management report when it is submitted to Congress.

‘‘(F) ENFORCEMENT.—The Railroad Retirement Board

may bring a civil action—

‘‘(i) to enjoin any act or practice by the Trust,

its Board of Trustees, or its employees or agents that

violates any provision of this Act; or

‘‘(ii) to obtain other appropriate relief to redress

such violations, or to enforce any provisions of this

Act.

‘‘(6) RULES AND ADMINISTRATIVE POWERS.—The Board of

Trustees shall have the authority to make rules to govern

its operations, employ professional staff, and contract with outside advisers, including the Railroad Retirement Board, to provide legal, accounting, investment advisory, or other services

necessary for the proper administration of this subsection. In

the case of contracts with investment advisory services, compensation for such services may be on a fixed contract fee

basis or on such other terms and conditions as are customary

for such services.

‘‘(7) QUORUM.—Five members of the Board of Trustees

constitute a quorum to do business. Investment guidelines must

be adopted by a unanimous vote of the entire Board of Trustees.

All other decisions of the Board of Trustees shall be decided

by a majority vote of the quorum present. All decisions of

the Board of Trustees shall be entered upon the records of

the Board of Trustees. ‘‘(8) FUNDING.—The expenses of the Trust and the Board

of Trustees incurred under this subsection shall be paid from

the Trust.’’.

(b) CONFORMING AND TECHNICAL AMENDMENTS GOVERNING

INVESTMENTS.—Section 15(e) of the Railroad Retirement Act of 1974

(45 U.S.C. 231n(e)) is amended—

Deadline.

PUBLIC LAW 107–90—DEC. 21, 2001 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 OF FINANCING.—For all purposes of the Congressional Budget Act of 1974, the Balanced Budget and Emergency

Deficit Control Act of 1985, and chapter 11 of title 31, United

States Code, and notwithstanding section 20 of the Office of

Management and Budget Circular No. A–11, the purchase or sale

of non-Federal assets (other than gains or losses from such transactions) by the National Railroad Retirement Investment Trust

shall be treated as a means of financing.

(d) EFFECTIVE DATE.—The amendments made by this section

shall take effect on the first day of the month that begins more

than 30 days after enactment.

SEC. 106. ELIMINATION OF SUPPLEMENTAL ANNUITY ACCOUNT.

(a) SOURCE OF PAYMENTS.—Section 7(c)(1) of the Railroad

Retirement Act of 1974 (45 U.S.C. 231f(c)(1)) is amended by striking

‘‘payments of supplemental annuities under section 2(b) of this

Act shall be made from the Railroad Retirement Supplemental

Account, and’’.

(b) ELIMINATION OF ACCOUNT.—Section 15(c) of the Railroad

Retirement Act of 1974 (45 U.S.C. 231n(c)) is repealed.

(c) AMENDMENT TO RAILROAD RETIREMENT ACCOUNT.—Section

15(a) of the Railroad Retirement Act of 1974 (45 U.S.C. 231n(a))

is amended by striking ‘‘, except those portions of the amounts

covered into the Treasury under sections 3211(b),’’ and all that

follows through the end of the subsection and inserting a period.

(d) TRANSFER.—

(1) DETERMINATION.—As soon as possible after December

31, 2001, the Railroad Retirement Board shall—

(A) determine the amount of funds in the Railroad

Retirement Supplemental Account under section 15(c) of

the Railroad Retirement Act of 1974 (45 U.S.C. 231n(c))

as of the date of such determination; and

(B) direct the Secretary of the Treasury to transfer

such funds to the National Railroad Retirement Investment

Trust under section 15(j) of such Act (as added by section

105).

(2) TRANSFER BY THE SECRETARY OF THE TREASURY.—The

Secretary of the Treasury shall make the transfer described

in paragraph (1).

(e) EFFECTIVE DATE.—

(1) IN GENERAL.—Subject to paragraph (2), the amendments

made by subsections (a), (b), and (c) shall take effect January

1, 2002.

(2) ACCOUNT IN EXISTENCE UNTIL TRANSFER MADE.—The

Railroad Retirement Supplemental Account under section 15(c)

of the Railroad Retirement Act of 1974 (45 U.S.C. 231n(c))

45 USC 231n

note.

45 USC 231n

note.

45 USC 231n

note.

45 USC 231n

note.

115 STAT. 888 PUBLIC LAW 107–90—DEC. 21, 2001

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.’’.

PUBLIC LAW 107–90—DEC. 21, 2001 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) The Board shall from time to time certify—

‘‘(i) to the Secretary of the Treasury the amounts required

to be transferred from the Social Security Equivalent Benefit

Account and the Dual Benefits Payments Account to the disbursing agent to make payments of benefits and the Secretary

of the Treasury shall transfer those amounts;

‘‘(ii) to the Board of Trustees of the National Railroad

Retirement Investment Trust the amounts required to be transferred from the National Railroad Retirement Investment Trust

to the disbursing agent to make payments of benefits and

the Board of Trustees shall transfer those amounts; and

‘‘(iii) to the disbursing agent the name and address of

each individual entitled to receive a payment, the amount of

such payment, and the time at which the payment should

be made.’’.

(f) BENEFIT PAYMENTS.—Section 7(c)(1) of the Railroad Retirement Act of 1974 (45 U.S.C. 231f(c)(1)) is amended—

(1) by striking ‘‘from the Railroad Retirement Account’’

and inserting ‘‘by the disbursing agent under subsection (b)(4)

from money transferred to it from the National Railroad Retirement Investment Trust or the Social Security Equivalent Benefit Account, as the case may be’’; and

(2) by inserting ‘‘by the disbursing agent under subsection

(b)(4) from money transferred to it’’ after ‘‘Public Law 93–

445 shall be made’’.

(g) TRANSITIONAL RULE FOR EXISTING OBLIGATION.—In making

transfers under sections 15(k) and 15A(d)(2) of the Railroad Retirement Act of 1974, as amended by subsections (a) and (c), respectively, the Railroad Retirement Board shall consult with the Secretary of the Treasury to design an appropriate method to transfer

obligations held as of the date of enactment of this Act or to

convert such obligations to cash at the discretion of the Railroad

Retirement Board prior to transfer. The National Railroad Retirement Investment Trust may hold to maturity any obligations so

45 USC 231n

note.

Certification.

115 STAT. 890 PUBLIC LAW 107–90—DEC. 21, 2001

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

appropriate.

SEC. 108. ANNUAL RATIO PROJECTIONS AND CERTIFICATIONS BY THE

RAILROAD RETIREMENT BOARD.

(a) PROJECTIONS.—Section 22(a)(1) of the Railroad Retirement

Act of 1974 (45 U.S.C. 231u(a)(1)) is amended— (1) by inserting after the first sentence the following new

sentence: ‘‘On or before May 1 of each year beginning in 2003,

the Railroad Retirement Board shall compute its projection

of the account benefits ratio and the average account benefits

ratio (as defined by section 3241(c) of the Internal Revenue

Code of 1986) for each of the next succeeding five fiscal years.’’;

and

(2) by striking ‘‘the projection prepared pursuant to the

preceding sentence’’ and inserting ‘‘the projections prepared

pursuant to the preceding two sentences’’. (b) CERTIFICATIONS.—The Railroad Retirement Act of 1974 (45

U.S.C. 231 et seq.) is amended by adding at the end the following

new section:

‘‘COMPUTATION AND CERTIFICATION OF ACCOUNT BENEFIT RATIOS

‘‘SEC. 23. (a) INITIAL COMPUTATION AND CERTIFICATION.—On

or before November 1, 2003, the Railroad Retirement Board shall— ‘‘(1) compute the account benefits ratios for each of the

most recent 10 preceding fiscal years, and ‘‘(2) certify the account benefits ratios for each such fiscal

year to the Secretary of the Treasury.

‘‘(b) COMPUTATIONS AND CERTIFICATIONS AFTER 2003.—On or

before November 1 of each year after 2003, the Railroad Retirement

Board shall— ‘‘(1) compute the account benefits ratio for the fiscal year

ending in such year, and ‘‘(2) certify the account benefits ratio for such fiscal year

to the Secretary of the Treasury.

‘‘(c) DEFINITION.—As used in this section, the term ‘account

benefits ratio’ has the meaning given that term in section 3241(c)

of the Internal Revenue Code of 1986.’’.

TITLE II—AMENDMENTS TO THE

INTERNAL REVENUE CODE OF 1986

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

Except as otherwise provided, whenever in this title an amendment or repeal is expressed in terms of an amendment to, or

repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal

Revenue Code of 1986.

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

Subsection (c) of section 501 is amended by adding at the

end the following new paragraph:

‘‘(28) The National Railroad Retirement Investment Trust

established under section 15(j) of the Railroad Retirement Act

of 1974.’’.

26 USC 501.

45 USC 231v.

PUBLIC LAW 107–90—DEC. 21, 2001 115 STAT. 891

SEC. 203. REPEAL OF SUPPLEMENTAL ANNUITY TAX.

(a) REPEAL OF TAX ON EMPLOYEE REPRESENTATIVES.—Section

3211 is amended by striking subsection (b).

(b) REPEAL OF TAX ON EMPLOYERS.—Section 3221 is amended

by striking subsections (c) and (d) and by redesignating subsection

(e) as subsection (c).

(c) EFFECTIVE DATE.—The amendments made by this section

shall apply to calendar years beginning after December 31, 2001.

SEC. 204. EMPLOYER, EMPLOYEE REPRESENTATIVE, AND EMPLOYEE

TIER 2 TAX RATE ADJUSTMENTS.

(a) RATE OF TAX ON EMPLOYERS.—Subsection (b) of section

3221 is amended to read as follows:

‘‘(b) TIER 2 TAX.—

‘‘(1) IN GENERAL.—In addition to other taxes, there is

hereby imposed on every employer an excise tax, with respect

to having individuals in his employ, equal to the applicable

percentage of the compensation paid during any calendar year

by such employer for services rendered to such employer.

‘‘(2) APPLICABLE PERCENTAGE.—For purposes of paragraph

(1), the term ‘applicable percentage’ means—

‘‘(A) 15.6 percent in the case of compensation paid

during 2002,

‘‘(B) 14.2 percent in the case of compensation paid

during 2003, and

‘‘(C) in the case of compensation paid during any calendar year after 2003, the percentage determined under

section 3241 for such calendar year.’’.

(b) RATE OF TAX ON EMPLOYEE REPRESENTATIVES.—Section

3211, as amended by section 203, is amended by striking subsection

(a) and inserting the following new subsections:

‘‘(a) TIER 1 TAX.—In addition to other taxes, there is hereby

imposed on the income of each employee representative a tax equal

to the applicable percentage of the compensation received during

any calendar year by such employee representative for services

rendered by such employee representative. For purposes of the

preceding sentence, the term ‘applicable percentage’ means the

percentage equal to the sum of the rates of tax in effect under

subsections (a) and (b) of section 3101 and subsections (a) and

(b) of section 3111 for the calendar year.

‘‘(b) TIER 2 TAX.—

‘‘(1) IN GENERAL.—In addition to other taxes, there is

hereby imposed on the income of each employee representative

a tax equal to the applicable percentage of the compensation

received during any calendar year by such employee representatives for services rendered by such employee representative.

‘‘(2) APPLICABLE PERCENTAGE.—For purposes of paragraph

(1), the term ‘applicable percentage’ means—

‘‘(A) 14.75 percent in the case of compensation received

during 2002,

‘‘(B) 14.20 percent in the case of compensation received

during 2003, and

‘‘(C) in the case of compensation received during any

calendar year after 2003, the percentage determined under

section 3241 for such calendar year.

Applicability.

26 USC 3211

note.

26 USC 3221.

26 USC 3211.

115 STAT. 892 PUBLIC LAW 107–90—DEC. 21, 2001

‘‘(c) CROSS REFERENCE.—

‘‘For application of different contribution bases with respect to

the taxes imposed by subsections (a) and (b), see section

3231(e)(2).’’.

(c) RATE OF TAX ON EMPLOYEES.—Subsection (b) of section

3201 is amended to read as follows: ‘‘(b) TIER 2 TAX.— ‘‘(1) IN GENERAL.—In addition to other taxes, there is

hereby imposed on the income of each employee a tax equal

to the applicable percentage of the compensation received

during any calendar year by such employee for services rendered by such employee. ‘‘(2) APPLICABLE PERCENTAGE.—For purposes of paragraph

(1), the term ‘applicable percentage’ means— ‘‘(A) 4.90 percent in the case of compensation received

during 2002 or 2003, and ‘‘(B) in the case of compensation received during any

calendar year after 2003, the percentage determined under

section 3241 for such calendar year.’’. (d) DETERMINATION OF RATE.—Chapter 22 is amended by

adding at the end the following new subchapter:

‘‘Subchapter E—Tier 2 Tax Rate Determination

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

‘‘SEC. 3241. DETERMINATION OF TIER 2 TAX RATE BASED ON AVERAGE

ACCOUNT BENEFITS RATIO.

‘‘(a) IN GENERAL.—For purposes of sections 3201(b), 3211(b),

and 3221(b), the applicable percentage for any calendar year is

the percentage determined in accordance with the table in subsection (b). ‘‘(b) TAX RATE SCHEDULE.—

‘‘Average account benefits ratio Applicable percentage for sections

3211(b) and 3221(b)

Applicable percentage for section

At least But less than 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

26 USC 3241.

26 USC 3201.

PUBLIC LAW 107–90—DEC. 21, 2001 115 STAT. 893

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.

Æ

amount determined under the preceding sentence is not a multiple of 0.1, such amount shall be increased to the next highest

multiple of 0.1. ‘‘(2) ACCOUNT BENEFITS RATIO.—For purposes of this section, the term ‘account benefits ratio’ means, with respect to

any fiscal year, the amount determined by the Railroad Retirement Board by dividing the fair market value of the assets

in the Railroad Retirement Account and of the National Railroad Retirement Investment Trust (and for years before 2002,

the Social Security Equivalent Benefits Account) as of the close

of such fiscal year by the total benefits and administrative

expenses paid from the Railroad Retirement Account and the

National Railroad Retirement Investment Trust during such

fiscal year.

‘‘(d) NOTICE.—No later than December 1 of each calendar year,

the Secretary shall publish a notice in the Federal Register of

the rates of tax determined under this section which are applicable

for the following calendar year.’’. (e) CONFORMING AMENDMENTS.—

(1) Section 24(d)(3)(A)(iii) is amended by striking ‘‘section

3211(a)(1)’’ and inserting ‘‘section 3211(a)’’.

(2) Section 72(r)(2)(B)(i) is amended by striking ‘‘3211(a)(2)’’

and inserting ‘‘3211(b)’’.

(3) Paragraphs (2)(A)(iii)(II) and (4)(A) of section 3231(e)

are amended by striking ‘‘3211(a)(1)’’ and inserting ‘‘3211(a)’’.

(4) Section 3231(e)(2)(B)(ii)(I) is amended by striking

‘‘3211(a)(2)’’ and inserting ‘‘3211(b)’’.

(5) The table of subchapters for chapter 22 is amended

by adding at the end the following new item:

‘‘Subchapter E. Tier 2 tax rate determination.’’.

(f) EFFECTIVE DATE.—The amendments made by this section

shall apply to calendar years beginning after December 31, 2001.

Approved December 21, 2001.

Applicability.

26 USC 24 note.

26 USC 3231.

26 USC 72.

26 USC 24.

Deadline.

Federal Register,

publication.