I

106TH CONGRESS

2D SESSION H. R. 4844

To modernize the financing of the railroad retirement system and to provide

enhanced benefits to employees and beneficiaries.

IN THE HOUSE OF REPRESENTATIVES

JULY 13, 2000

Mr. SHUSTER (for himself, Mr. OBERSTAR, Mr. ARCHER, Mr. RANGEL, Mr.

PETRI, Mr. RAHALL, Mr. SHAW, and Mr. MATSUI) introduced the following bill; which was referred to the Committee on Transportation and

Infrastructure, and in addition to the Committee on Ways and Means,

for a period to be subsequently determined by the Speaker, in each case

for consideration of such provisions as fall within the jurisdiction of the

committee concerned

A BILL

To modernize the financing of the railroad retirement system

and to provide enhanced benefits to employees and beneficiaries.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

5 ‘‘Railroad Retirement and Survivors’ Improvement Act of

6 2000’’.

7 (b) TABLE OF CONTENTS.—
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Sec. 1. Short title; table of contents.

TITLE I—AMENDMENTS TO RAILROAD RETIREMENT ACT OF 1974

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

Sec. 102. Retirement age restoration.

Sec. 103. Vesting requirement.

Sec. 104. Repeal of railroad retirement maximum.

Sec. 105. Investment of railroad retirement assets.

Sec. 106. Elimination of supplemental annuity account.

Sec. 107. Transfer authority revisions.

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

TITLE II—AMENDMENTS TO THE INTERNAL REVENUE CODE OF

1986

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

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

Sec. 203. Repeal of supplemental annuity tax.

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

1 TITLE I—AMENDMENTS TO RAIL2 ROAD RETIREMENT ACT OF

3 1974

4 SEC. 101. EXPANSION OF WIDOW’S AND WIDOWER’S BENE5 FITS.

6 (a) IN GENERAL.—Section 4(g) of the Railroad Re7 tirement Act of 1974 is amended by adding at the end

8 the following new subdivision:

9 ‘‘(10)(i) If for any month the unreduced annuity pro10 vided under this section for a widow or widower is less

11 than the widow’s or widower’s initial minimum amount

12 computed pursuant to paragraph (ii) of this subdivision,

13 the unreduced annuity shall be increased to that initial

14 minimum amount. For the purposes of this subdivision,

15 the unreduced annuity is the annuity without regard to
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1 any deduction on account of work, without regard to any

2 reduction for entitlement to an annuity under section

3 2(a)(1) of this Act, without regard to any reduction for

4 entitlement to a benefit under title II of the Social Secu5 rity Act, and without regard to any reduction for entitle6 ment to a public service pension pursuant to sections

7 202(e)(7), 202(f)(2), or section 202(g)(4) of the Social Se8 curity Act.

9 ‘‘(ii) For the purposes of this subdivision, the widow

10 or widower’s initial minimum amount is the amount of the

11 unreduced annuity computed at the time an annuity is

12 awarded to that widow or widower, except that—

13 ‘‘(A) in subsection (g)(1)(i) ‘100 per centum’

14 shall be substituted for ‘50 per centum’; and

15 ‘‘(B) in subsection (g)(2)(ii) ‘130 per centum’

16 shall be substituted for ‘80 per centum’ both places

17 it appears.

18 ‘‘(iii) If a widow or widower who was previously enti19 tled to a widow’s or widower’s annuity under section

20 2(d)(1)(ii) of this Act becomes entitled to a widow’s or

21 widow’s annuity under section 2(d)(1)(i) of this Act, a new

22 initial minimum amount shall be computed at the time of

23 award of the widow’s or widower’s annuity under section

24 2(d)(1)(i) of this Act.’’.

25 (b) EFFECTIVE DATE.—
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1 (1) GENERALLY.—The amendment made by

2 this section shall take effect January 1, 2001 and

3 shall apply to annuity amounts accruing for months

4 after December 2000 in the case of annuities award5 ed on or after that date and in the case of annuities

6 awarded before that date if the annuity amount

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

8 was computed under section 4(g), as amended by

9 Public Law 97–35.

10 (2) SPECIAL RULE FOR ANNUITIES AWARDED

11 BEFORE JANUARY 1, 2001.—In applying the amend12 ments made by this section to annuities awarded be13 fore January 1, 2001, the calculation of the initial

14 minimum amount under new section 4(g)(10)(ii) of

15 the Act shall be made as of the date of award of the

16 widow’s or widower’s annuity.

17 SEC. 102. RETIREMENT AGE RESTORATION.

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

19 Railroad Retirement Act of 1974 is amended by inserting

20 after ‘‘(2)’’ the following: ‘‘For purposes of this sub21 section, individuals entitled to an annuity under section

22 2(a)(1)(ii) of this Act shall, except for the purposes of re23 computations in accordance with section 215(f) of the So24 cial Security Act, be deemed to have attained retirement
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1 age (as defined by section 216(l) of the Social Security

2 Act).’’.

3 (b) SPOUSE AND SURVIVOR ANNUITIES.—Section

4 4(a)(2) of the Railroad Retirement Act of 1974 is amend5 ed by striking ‘‘if an’’ and all that follows through ‘‘section

6 2(c)(1) of this Act’’ and inserting ‘‘a spouse entitled to

7 an annuity under section 2(c)(1)(ii)(B) of this Act’’.

8 (c) CONFORMING REPEALS.—Sections 3(a)(3),

9 4(a)(3), and 4(a)(4) of the Railroad Retirement Act are

10 repealed.

11 (d) EFFECTIVE DATES.—

12 (1) GENERALLY.—Except as provided in para13 graph (2), the amendments made by this section

14 shall apply to annuities that begin to accrue on or

15 after January 1, 2001.

16 (2) EXCEPTION.—The amount of the annuity

17 provided for a spouse under section 4(a) shall be

18 computed under section 4(a)(3), as in effect before

19 the date of the enactment of this section, if the an20 nuity amount provided under section 3(a) for the in21 dividual on whose employment record the spouse an22 nuity is based was computed under section 3(a)(3),

23 as in effect before the date of the enactment of this

24 section.
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1 SEC. 103. VESTING REQUIREMENT.

2 (a) CERTAIN ANNUITIES FOR INDIVIDUALS.—Section

3 2(a) of the Railroad Retirement Act of 1974 is amended—

4 (1) by inserting in subdivision (1) ‘‘or, for pur5 poses of paragraphs (i), (iii), and (v), five years of

6 service, all of which accrues after December 31,

7 1995’’ after ‘‘ten years of service’’, and

8 (2) by adding at the end the following:

9 ‘‘(4) An individual who is entitled to an annuity

10 under paragraph (v) of subdivision (1), but who does not

11 have at least ten years of service, shall, prior to the month

12 in which the individual attains age 62, be entitled only

13 to an annuity amount computed under section 3(a) of this

14 Act (without regard to section 3(a)(2) of this Act) or sec15 tion 3(f)(3) of this Act. Upon attainment of age 62, such

16 an individual may also be entitled to an annuity amount

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

18 shall be reduced for early retirement in the same manner

19 as if the individual were entitled to an annuity under sec20 tion 2(a)(1)(iii).’’.

21 (b) COMPUTATION RULE FOR INDIVIDUALS’ ANNU22 ITIES.—Section 3(a) of the Railroad Retirement Act of

23 1974, as amended by section 102 of this Act, is further

24 amended by adding at the end the following new subdivi25 sion:
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1 ‘‘(3) If an individual entitled to an annuity under sec2 tion 2(a)(1)(i) or (iii) of this Act on the basis of less than

3 ten years of service is entitled to a benefit under section

4 202(a), section 202(b), or section 202(c) of the Social Se5 curity Act which began to accrue before the annuity under

6 section 2(a)(1)(i) or (iii) of this Act, the annuity amount

7 provided such individual under this subsection, shall be

8 computed as though the annuity under this Act began to

9 accrue on the later of (A) the date on which the benefit

10 under section 202(a), section 202(b), or section 202(c) of

11 the Social Security Act began or (B) the date on which

12 the individual first met the conditions for entitlement to

13 an age reduced annuity under this Act other than the con14 ditions set forth in sections 2(e)(1) and 2(e)(2) of this Act

15 and the requirement that an application be filed.’’.

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

17 Railroad Retirement Act of 1974 is amended by inserting

18 ‘‘or five years of service, all of which accrues after Decem19 ber 31, 1995’’ after ‘‘ten years of service.’’.–

20 (d) LIMITATION ON ANNUITY AMOUNTS.—Section 2

21 of the Railroad Retirement Act of 1974 is amended by

22 adding at the end the following:

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

24 section who has completed five years of service, all of

25 which accrues after 1995, but who has not completed ten
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1 years of service, and the spouse, divorced spouse, and sur2 vivors of such individual, shall not be entitled to an annu3 ity amount provided under section 3(a), section 4(a), or

4 section 4(f) of this Act unless the individual, or the indi5 vidual’s spouse, divorced spouse, or survivors, would be en6 titled to a benefit under the Social Security Act on the

7 basis of the individual’s employment record under both the

8 Railroad Retirement Act and the Social Security Act.’’.

9 (e) COMPUTATION RULE FOR SPOUSES’ ANNU10 ITIES.—Section 4(a) of the Railroad Retirement Act of

11 1974, as amended by section 102 of this Act, is further

12 amended by adding at the end the following new subdivi13 sion:

14 ‘‘(3) If a spouse entitled to an annuity under section

15 2(c)(1)(ii)(A), section 2(c)(1)(ii)(C), or section 2(c)(2) of

16 this Act or a divorced spouse entitled to an annuity under

17 section 2(c)(4) of this Act on the basis of the employment

18 record of an employee who will have completed less than

19 10 years of service is entitled to a benefit under section

20 202(a), section 202(b), or section 202(c) of the Social Se21 curity Act which began to accrue before the annuity under

22 section 2(c)(1)(ii)(A), section 2(c)(1)(ii)(C), section

23 2(c)(2), or section 2(c)(4) of this Act, the annuity amount

24 provided under this subsection shall be computed as

25 though the annuity under this Act began to accrue on the
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1 later of (A) the date on which the benefit under section

2 202(a), section 202(b), or section 202(c) of the Social Se3 curity Act began or (B) the first date on which the annu4 itant met the conditions for entitlement to an age reduced

5 annuity under this Act other than the conditions set forth

6 in sections 2(e)(1) and 2(e)(2) of this Act and the require7 ment that an application be filed.’’.

8 (f) APPLICATION DEEMING PROVISION.—Section

9 5(b) of the Railroad Retirement Act of 1974 is amended

10 by striking the second sentence and inserting the fol11 lowing: ‘‘An application filed with the Board for an em12 ployee annuity, spouse annuity, or divorced spouse annuity

13 on the basis of the employment record of an employee who

14 will have completed less than ten years of service shall be

15 deemed to be an application for any benefit to which such

16 applicant may be entitled under this Act or section 202(a),

17 section 202(b), or section 202(c) of the Social Security

18 Act. An application filed with the Board for an annuity

19 on the basis of the employment record of an employee who

20 will have completed ten years of service shall, unless the

21 applicant specified otherwise, be deemed to be an applica22 tion for any benefit to which such applicant may be enti23 tled under this Act or title II of the Social Security Act.’’.
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1 (g) CREDITING SERVICE UNDER THE SOCIAL SECU2 RITY ACT.—Section 18(2) of the Railroad Retirement Act

3 of 1974 is amended—

4 (1) by inserting ‘‘or less than five years of serv5 ice, all of which accrues after December 31, 1995’’

6 after ‘‘ten years of service’’ every place it occurs;

7 and

8 (2) by inserting ‘‘or five or more years of serv9 ice, all of which accrues after December 31, 1995’’

10 after ‘‘ten or more years of service’’.

11 (h) AUTOMATIC BENEFIT ELIGIBILITY ADJUST12 MENTS.—Section 19 of Railroad Retirement Act of 1974

13 is amended—

14 (1) by inserting ‘‘or five or more years of serv15 ice, all of which accrues after December 31, 1995’’

16 after ‘‘ten years of service’’ in subsection (c); and

17 (2) by inserting ‘‘or five or more years of serv18 ice, all of which accrues after December 31, 1995’’

19 after ‘‘ten years of service’’ in subsection (d)(2).

20 (i) CONFORMING AMENDMENTS.—

21 (1) Section 6(e)(1) of the Railroad Retirement

22 Act of 1974 is amended by inserting ‘‘or five or

23 more years of service, all of which accrues after De24 cember 31, 1995’’ after ‘‘ten years of service’’.
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1 (2) Section 7(b)(2) of the Railroad Retirement

2 Act of 1974 is amended by inserting ‘‘or five or

3 more years of service, all of which accrues after De4 cember 31, 1995’’ after ‘‘ten years of service’’.

5 (3) Section 205(i) of the Social Security Act is

6 amended by inserting ‘‘or five or more years of serv7 ice, all of which accrues after December 31, 1995’’

8 after ‘‘ten years of service’’.

9 (j) EFFECTIVE DATE.—The amendments made by

10 this section shall take effect January 1, 2001.

11 SEC. 104. REPEAL OF RAILROAD RETIREMENT MAXIMUM.

12 (a) EMPLOYEE ANNUITIES.—Section 3(f) of the Rail13 road Retirement Act of 1974 is amended by striking para14 graph (1).

15 (b) SPOUSE AND SURVIVOR ANNUITIES.—Section 4

16 of the Railroad Retirement Act of 1974 is amended by

17 striking subsection (c).

18 (c) EFFECTIVE DATE.—The amendments made by

19 this section shall be effective January 1, 2001, and shall

20 apply to annuity amounts accruing for months after De21 cember 2000.

22 SEC. 105. INVESTMENT OF RAILROAD RETIREMENT ASSETS.

23 (a) ESTABLISHMENT OF RAILROAD RETIREMENT IN24 VESTMENT TRUST.—Section 15 of the Railroad Retire-
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1 ment Act of 1974 is amended by inserting after subsection

2 (i) the following:

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

4 ‘‘(1) ESTABLISHMENT.—The Railroad Retire5 ment Investment Trust (hereinafter in this sub6 section referred to as the ‘Trust’) is hereby estab7 lished. The Trust shall manage and invest the assets

8 of the Railroad Retirement Trust Fund (hereinafter

9 in this section referred to as the ‘‘Fund’’, which is

10 hereby established.

11 ‘‘(2) NOT A FEDERAL AGENCY OR INSTRUMEN12 TALITY.—The Trust is not a department, agency, or

13 instrumentality of the Government of the United

14 States and shall not be subject to title 31, United

15 States Code.

16 ‘‘(3) BOARD OF TRUSTEES.—

17 ‘‘(A) GENERALLY.—The Trust shall have a

18 Board of Trustees, consisting of 7 members,

19 each appointed by a unanimous vote of the

20 Railroad Retirement Board. Of the 7 members,

21 3 shall represent the interests of labor, 3 shall

22 represent the interests of management, and 1

23 shall represent the interests of the general pub24 lic. The members of the Board of Trustees shall
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1 not be considered officers or employees of the

2 Government of the United States.

3 ‘‘(B) QUALIFICATIONS.—Members of the

4 Board of Trustees shall be appointed only from

5 among persons who have experience and exper6 tise in the management of financial investments

7 and pension plans. No member of the Railroad

8 Retirement Board shall be eligible to be a mem9 ber of the Board of Trustees.

10 ‘‘(C) TERMS.—Except as provided in this

11 subparagraph, each member shall be appointed

12 for a 3-year term. The initial members ap13 pointed under this paragraph shall be divided

14 into 3 equal groups so nearly as may be, of

15 which one group will be appointed for a 1-year

16 term, one for a 2-year term, and one for a 3-

17 year term. A vacancy in the Board of Trustees

18 shall not affect the powers of the Board of

19 Trustees and shall be filled in the same manner

20 as the selection of the member whose departure

21 caused the vacancy. Upon the expiration of a

22 term of a member of the Board of Trustees,

23 that member shall continue to serve until a suc24 cessor is appointed and qualifies.
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1 ‘‘(4) POWERS OF THE BOARD OF TRUSTEES.—

2 The Board of Trustees shall—

3 ‘‘(A) retain independent advisers to assist

4 it in the formulation and adoption of its invest5 ment guidelines;

6 ‘‘(B) retain independent investment man7 agers to invest the assets of the Fund in a

8 manner consistent with such investment guide9 lines;

10 ‘‘(C) invest assets in the Fund, pursuant

11 to the policies adopted in subparagraph (A);

12 ‘‘(D) pay administrative expenses of the

13 Fund and the Trust from the money in the

14 Fund; and

15 ‘‘(E) transfer money to the disbursing

16 agent to pay benefits payable under this Act

17 from money in the Fund and administrative ex18 penses related to those benefits.

19 Section 15(j)(5), page 15, lines 4 through 25 through

20 page 16, lines 1 through 2, is amended to read as follows:

21 ‘‘(5) REPORTING REQUIREMENTS AND FIDU22 CIARY STANDARDS.—The following reporting re23 quirements and fiduciary standards shall apply with

24 respect to the Railroad Retirement Trust and the
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1 Railroad Retirement Trust Fund (and the assets

2 held in such Trust Fund):

3 ‘‘(A) DUTIES OF THE BOARD OF TRUST4 EES.—The Railroad Retirement Trust and each

5 member of the Board of Trustees shall dis6 charge their duties with respect to the assets of

7 the Fund solely in the interest of the Railroad

8 Retirement Board and through it, the partici9 pants and beneficiaries of the programs funded

10 under this Act—

11 ‘‘(i) for the exclusive purpose of—

12 ‘‘(I) providing benefits to partici13 pants and their beneficiaries; and

14 ‘‘(II) defraying reasonable ex15 penses of administering the functions

16 of the Trust;

17 ‘‘(ii) with the care, skill, prudence,

18 and diligence under the circumstances then

19 prevailing that a prudent person acting in

20 a like capacity and familiar with such mat21 ters would use in the conduct of an enter22 prise of a like character and with like

23 aims;

24 ‘‘(iii) by diversifying investments so as

25 to minimize the risk of large losses, unless
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1 under the circumstances it is clearly pru2 dent not to do so; and

3 ‘‘(iv) in accordance with Trust gov4 erning documents and instruments insofar

5 as such documents and instruments are

6 consistent with this Act.

7 ‘‘(B) PROHIBITIONS WITH RESPECT TO

8 MEMBERS OF THE BOARD OF TRUSTEES.—No

9 member of the Board of Trustees shall—

10 ‘‘(i) deal with the assets of the Fund

11 in the trustee’s own interest or for the

12 trustee’s own account;

13 ‘‘(ii) in an individual or in any other

14 capacity act in any transaction involving

15 the assets of the Fund on behalf of a party

16 (or represent a party) whose interests are

17 adverse to the interests of the Trust, the

18 Fund, the Railroad Retirement Board, or

19 the interests of participants or bene20 ficiaries; or

21 ‘‘(iii) receive any consideration for the

22 director’s own personal account from any

23 party dealing with the assets of the Fund.

24 ‘‘(C) EXCULPATORY PROVISIONS AND IN25 SURANCE.—Any provision in an agreement or
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1 instrument that purports to relieve a trustee

2 from responsibility or liability for any responsi3 bility, obligation or duty under this Act shall be

4 void: Provided, however, That nothing shall

5 preclude—

6 ‘‘(i) the Trust from purchasing insur7 ance for its trustees or for itself to cover

8 liability or losses occurring by reason of

9 the act or omission of a trustee, if such in10 surance permits recourse by the insurer

11 against the trustee in the case of a breach

12 of a fiduciary obligation by such trustee;

13 ‘‘(ii) a trustee from purchasing insur14 ance to cover liability under this section

15 from and for his own account; or

16 ‘‘(iii) an employer or an employee or17 ganization from purchasing insurance to

18 cover potential liability of one or more

19 trustees with respect to their fiduciary re20 sponsibilities, obligations, and duties under

21 this section.

22 ‘‘(D) BONDING.—Every trustee and every

23 person who handles funds or other property of

24 the Fund (hereafter in this subsection referred
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1 to as ‘Trust official’) shall be bonded in accord2 ance with the following:

3 ‘‘(i) The amount of such bond shall be

4 fixed at the beginning of each fiscal year

5 of the Trust by the Railroad Retirement

6 Board. Such amount shall not be less than

7 10 percent of the amount of the funds

8 handled. In no case shall such bond be less

9 than $1,000 nor more than $500,000, ex10 cept that the Railroad Retirement Board,

11 after consideration of the record, may pre12 scribe an amount in excess of $500,000,

13 subject to the 10 per centum limitation of

14 the preceding sentence.

15 ‘‘(ii) It shall be unlawful for any

16 Trust official to receive, handle, disburse,

17 or otherwise exercise custody or control of

18 any of the funds or other property of the

19 Fund without being bonded as required by

20 this subsection and it shall be unlawful for

21 any Trust official, or any other person hav22 ing authority to direct the performance of

23 such functions, to permit such functions,

24 or any of them, to be performed by any

25 Trust official, with respect to whom the re-
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1 quirements this subsection have not been

2 met.

3 ‘‘(iii) It shall be unlawful for any per4 son to procure any bond required by this

5 subsection from any surety or other com6 pany or through any agent or broker in

7 whose business operations such person has

8 any control or significant financial interest,

9 direct or indirect.

10 ‘‘(E) AUDIT AND REPORT.—

11 ‘‘(i) The Trust shall annually engage

12 an independent qualified public accountant

13 to audit the financial statements of the

14 Fund.

15 ‘‘(ii) The Trust shall submit an an16 nual management report to the Congress

17 not later than 180 days after the end of

18 the Trust’s fiscal year. A management re19 port under this subsection shall include—

20 ‘‘(I) a statement of financial po21 sition;

22 ‘‘(II) a statement of operations;

23 ‘‘(III) a statement of cash flows;
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1 ‘‘(IV) a statement on internal ac2 counting and administrative control

3 systems;

4 ‘‘(V) the report resulting from an

5 audit of the financial statements of

6 the Trust conducted under subpara7 graph (E)(i); and

8 ‘‘(VI) any other comments and

9 information necessary to inform the

10 Congress about the operations and fi11 nancial condition of the Trust and the

12 Fund.

13 ‘‘(iii) The Trust shall provide the

14 President, the Railroad Retirement Board,

15 and the Director of the Office of Manage16 ment and Budget a copy of the manage17 ment report when it is submitted to Con18 gress.

19 ‘‘(6) RULES AND ADMINISTRATIVE POWERS.—

20 The Board of Trustees shall have the authority to

21 make rules to govern its operations, employ profes22 sional staff, and contract with outside advisers to

23 provide legal, accounting, investment advisory or

24 other services necessary for the proper administra25 tion of this subsection. In the case of contracts with
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1 investment advisory services, compensation for such

2 services may be on a fixed contract fee basis or on

3 such other terms and conditions as are customary

4 for such services.

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

6 Trustees constitute a quorum to do business. Invest7 ment guidelines must be adopted by a unanimous

8 vote of the Board of Trustees. All other decisions of

9 the Board of Trustees shall be decided by a majority

10 vote. All decisions of the Board of Trustees shall be

11 entered upon the records of the Board of Trustees.’’.

12 (b) CONFORMING AND TECHNICAL AMENDMENTS

13 GOVERNING INVESTMENTS.—Subsection 15(e) of the

14 Railroad Retirement Act of 1974 is amended—

15 (1) beginning in the first sentence, by striking

16 ‘‘, the Dual Benefits Payments Account’’ and all

17 that follows through ‘‘may be made only’’ in the sec18 ond sentence and inserting ‘‘and the Dual Benefits

19 Payments Account as are not transferred to the

20 Railroad Retirement Investment Trust as the Board

21 may determine’’;

22 (2) by striking ‘‘the Second Liberty Bond Act,

23 as amended’’ and inserting ‘‘chapter 31 of title 31’’;

24 and
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1 (3) by striking ‘‘the foregoing requirements’’

2 and inserting ‘‘the requirements of this subsection’’.

3 (c) EFFECTIVE DATE.—The amendments made by

4 this section shall take effect on the date of the enactment

5 of this section.

6 SEC. 106. ELIMINATION OF SUPPLEMENTAL ANNUITY AC7 COUNT.

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

9 Railroad Retirement Act of 1974 is amended by striking

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

11 of this Act shall be made from the Railroad Retirement

12 Supplemental Account, and’’.

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

14 the Railroad Retirement Act of 1974 is repealed.

15 (c) IN GENERAL.—Section 15(a) of the Railroad Re16 tirement Act of 1974 is amended by striking ‘‘, except

17 those portions of the amounts covered into the Treasury

18 under sections 3211(b),’’ and all that follows through the

19 end of the subsection and inserting a period.

20 (d) EFFECTIVE DATE.—The amendments made by

21 this section shall take effect January 1, 2001, except that

22 the Railroad Retirement Supplemental Account shall con23 tinue to exist until the transfer authorized by the following

24 sentence occurs. As soon as possible after December 31,

25 2000, the Board shall determine the balance in the Rail-
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1 road Retirement Supplemental Account and shall direct

2 the Secretary of the Treasury to transfer such amount to

3 the Railroad Retirement Trust Fund and the Secretary

4 shall make such transfer.

5 SEC. 107. TRANSFER AUTHORITY REVISIONS.

6 (a) RAILROAD RETIREMENT ACCOUNT.—Section 15

7 of the Railroad Retirement Act of 1974 is amended by

8 adding after subsection (j) the following:

9 ‘‘(k) TRANSFERS TO THE FUND.—The Board shall,

10 upon establishment of the Railroad Retirement Trust

11 Fund and from time to time thereafter, direct the Sec12 retary of the Treasury to transfer, in such manner as will

13 maximize the investment returns to the Railroad Retire14 ment system, that portion of the Railroad Retirement Ac15 count that is not needed to pay current administrative ex16 penses of the Board to the Railroad Retirement Trust

17 Fund. The Secretary shall make that transfer.

18 (b) RAILROAD RETIREMENT TRUST FUND.—Section

19 15 of the Railroad Retirement Act of 1974, as amended

20 by subsection (a), is further amended by adding after sub21 section (k) the following:

22 ‘‘(l) RAILROAD RETIREMENT TRUST FUND.—The

23 Railroad Retirement Trust shall from time to time trans24 fer to the disbursing agent described in section 7(b)(4)

25 such amounts as may be necessary to pay benefits under
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1 this Act (other than benefits paid from the Social Security

2 Equivalent Benefit Account or the Dual Benefit Payments

3 Account) and administrative expenses related to those

4 benefits.’’.

5 (c) SOCIAL SECURITY EQUIVALENT BENEFIT AC6 COUNT.—

7 (1) TRANSFERS TO FUND.—Upon establishment

8 of the Railroad Retirement Trust Fund and from

9 time to time thereafter, the Board shall direct the

10 Secretary of the Treasury to transfer, in such man11 ner as will maximize the investment returns to the

12 Railroad Retirement system, the balance of the So13 cial Security Equivalent Benefit Account not needed

14 to pay current benefits required to be paid from that

15 Account to the Railroad Retirement Trust Fund,

16 and the Secretary shall make that transfer. Any bal17 ance transferred under this paragraph shall be used

18 by the Railroad Retirement Trust only to pay bene19 fits under this Act or to purchase obligations of the

20 United States that are backed by the full faith and

21 credit of the United States pursuant to chapter 31

22 of title 31, United States Code. The proceeds of

23 sales of, and the interest income from, such obliga24 tions shall be used by the Trust only to pay benefits

25 under this Act.
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1 (2) TRANSFERS TO DISBURSING AGENT.—Sec2 tion 15A(c)(1) of the Railroad Retirement Act of

3 1974 is amended by adding at the end the following:

4 ‘‘The Secretary shall from time to time transfer to

5 the disbursing agent under section 7(b)(4) amounts

6 necessary to pay those benefits.’’.

7 (3) CONFORMING AMENDMENT.—Section

8 15A(d)(1) of the Railroad Retirement Act of 1974

9 is amended by striking the second and third sen10 tences.

11 (d) DUAL BENEFITS PAYMENTS ACCOUNT.—Section

12 15(d)(1) of the Railroad Retirement Act 1974 is amended

13 by adding at the end the following: ‘‘The Secretary of the

14 Treasury shall from time to time transfer from the Dual

15 Benefits Payments Account to the disbursing agent under

16 section 7(b)(4) amounts necessary to pay benefits payable

17 from that Account.

18 (e) CERTIFICATION BY THE BOARD AND PAY19 MENT.—Paragraph (4) of section 7(b) of the Railroad Re20 tirement Act of 1974 is amended to read as follows:

21 ‘‘(4)(A) The Railroad Retirement Board, after con22 sultation with the Board of Trustees of the Railroad Re23 tirement Trust and the Secretary of the Treasury, shall

24 enter into an arrangement with a nongovernmental finan25 cial institution to serve as disbursing agent for benefits
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1 payable under this Act who shall disburse consolidated

2 benefits under this Act to each recipient.

3 ‘‘(B) The Board shall from time to time certify—

4 ‘‘(i) to the Secretary of the Treasury the

5 amounts required to be transferred from the Social

6 Security Equivalent Benefit Account and the the

7 Dual Benefits Payments Account to the disbursing

8 agent to make payments of benefits and the Sec9 retary of the Treasury shall transfer those amounts;

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

11 Retirement Investment Trust the amounts required

12 to be transferred from the Railroad Retirement In13 vestment Trust to the disbursing agent to make pay14 ments of benefits and the Board of Trustees shall

15 transfer those amounts; and

16 ‘‘(iii) to the disbursing agent the name and ad17 dress of each individual entitled to receive a pay18 ment, the amount of such payment, and the time at

19 which the payment should be made.’’.

20 (f) BENEFIT PAYMENTS.—Section 7(c)(1) of the

21 Railroad Retirement Act of 1974 is amended—

22 (1) by striking ‘‘from the Railroad Retirement

23 Account’’ and inserting ‘‘by the disbursing agent

24 under subsection (b)(4) from money transferred to it

25 from the Railroad Retirement Trust Fund or the So-
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1 cial Security Equivalent Benefit Account, as the case

2 may be’’; and

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

4 subsection (b)(4) from money transferred to it’’

5 after ‘‘Public Law 93–445 shall be made’’.

6 SEC. 108. ANNUAL RATIO PROJECTIONS AND CERTIFI7 CATIONS BY THE RAILROAD RETIREMENT

8 BOARD.

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

10 Retirement Act of 1974 is amended—

11 (1) by adding the following sentence after the

12 first sentence: ‘‘On or before May 1 of each year be13 ginning in 2002, the Railroad Retirement Board

14 shall compute its projection of the account benefits

15 ratio and the average account benefits ratio (as de16 fined by section 3241(c) of the Internal Revenue

17 Code of 1986) for each of the next succeeding five

18 fiscal years.’’; and

19 (2) by striking ‘‘the projection prepared pursu20 ant to the preceding sentence’’ and inserting ‘‘the

21 projections prepared pursuant to the preceding two

22 sentences’’.

23 (b) CERTIFICATIONS.—The Railroad Retirement Act

24 of 1974 is amended by adding at the end the following:
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1 ‘‘Computation and Certification of Account Benefit

2 Ratios

3 ‘‘SEC. 23. (a) On or before November 1, 2002, the

4 Railroad Retirement Board shall—

5 ‘‘(1) compute the account benefits ratios for

6 each of the most recent 10 preceding fiscal years,

7 and

8 ‘‘(2) certify the account benefits ratios for each

9 such fiscal year to the Secretary.

10 ‘‘(b) On or before November 1 of each year after

11 2002, the Railroad Retirement Board shall—

12 ‘‘(1) compute the account benefits ratio for the

13 fiscal year ending in such year, and

14 ‘‘(2) certify the account benefits ratio for such

15 fiscal year to the Secretary.

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

17 ‘account benefit ratio’ has the meaning given that term

18 in section 3241(c) of the Internal Revenue Code of

19 1986.’’.
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1 TITLE II—AMENDMENTS TO THE

2 INTERNAL REVENUE CODE

3 OF 1986

4 SEC. 201. AMENDMENTS TO THE INTERNAL REVENUE CODE

5 OF 1986.

6 Except as otherwise provided, whenever in this title

7 an amendment or repeal is expressed in terms of an

8 amendment to, or repeal of, a section or other provision,

9 the reference shall be considered to be made to a section

10 or other provision of the Internal Revenue Code of 1986.

11 SEC. 202. EXEMPTION FROM TAX FOR RAILROAD RETIRE12 MENT INVESTMENT TRUST.

13 Subsection (c) of section 501 is amended by adding

14 at the end the following new paragraph:

15 ‘‘(28) The Railroad Retirement Investment

16 Trust established under section 15(j) of the Railroad

17 Retirement Act of 1974.’’

18 SEC. 203. REPEAL OF SUPPLEMENTAL ANNUITY TAX.

19 (a) REPEAL OF TAX ON EMPLOYEE REPRESENTA20 TIVES.—Section 3211 is amended by striking subsection

21 (b).

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

23 is amended by striking subsections (c) and (d).
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to calendar years beginning after

3 December 31, 2000.

4 SEC. 204. EMPLOYER, EMPLOYEE REPRESENTATIVE, AND

5 EMPLOYEE TIER 2 TAX RATE ADJUSTMENTS.

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

7 of section 3221 is amended to read as follows:

8 ‘‘(b) TIER 2 TAX.—

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

10 there is hereby imposed on every employer an excise

11 tax, with respect to having individuals in his employ,

12 equal to the applicable percentage of the compensa13 tion paid during any calendar year by such employer

14 for services rendered to such employer.

15 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

16 of paragraph (1), the term ‘applicable percentage’

17 means—

18 ‘‘(A) 15.6 percent in the case of compensa19 tion paid during 2001,

20 ‘‘(B) 14.2 percent in the case of compensa21 tion paid during 2002, and

22 ‘‘(C) in the case of compensation paid dur23 ing any calendar year after 2002, the percent24 age determined under section 3241 for such cal25 endar year.’’.
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1 (b) RATE OF TAX ON EMPLOYEE REPRESENTA2 TIVES.—Section 3211, as amended by section 203, is

3 amended by striking subsection (a) and inserting the fol4 lowing new subsections:

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

6 is hereby imposed on the income of each employee rep7 resentative a tax equal to the applicable percentage of the

8 compensation received during any calendar year by such

9 employee representative for services rendered by such em10 ployee representative. For purposes of the preceding sen11 tence, the term ‘applicable percentage’ means the percent12 age equal to the sum of the rates of tax in effect under

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

14 (a) and (b) of section 3111 for the calendar year.

15 ‘‘(b) TIER 2 TAX.—

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

17 there is hereby imposed on the income of each em18 ployee representative a tax equal to the applicable

19 percentage of the compensation received during any

20 calendar year by such employee representatives for

21 services rendered by such employee representative.

22 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

23 of paragraph (1), the term ‘applicable percentage’

24 means—
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1 ‘‘(A) 14.75 percent in the case of com2 pensation received during 2001,

3 ‘‘(B) 14.20 percent in the case of com4 pensation received during 2002, and

5 ‘‘(C) in the case of compensation received

6 during any calendar year after 2002, the per7 centage determined under section 3241 for such

8 calendar year.

9 ‘‘(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).’’.

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

11 of section 3201 is amended to read as follows:

12 ‘‘(b) TIER 2 TAX.—

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

14 there is hereby imposed on the income of each em15 ployee a tax equal to the applicable percentage of

16 the compensation received during any calendar year

17 by such employee for services rendered by such em18 ployee.

19 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

20 of paragraph (1), the term ‘applicable percentage’

21 means—

22 ‘‘(A) 4.90 percent in the case of compensa23 tion received during 2001 or 2002, and
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1 ‘‘(B) in the case of compensation received

2 during any calendar year after 2002, the per3 centage determined under section 3241 for such

4 calendar year.’’.

5 (d) DETERMINATION OF RATE.—Chapter 22 is

6 amended by adding at the end thereof the following new

7 subchapter:

8 ‘‘Subchapter E—Tier 2 Tax Rate

9 Determination

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

10 ‘‘SEC. 3241. DETERMINATION OF TIER 2 TAX RATE BASED

11 ON AVERAGE ACCOUNT BENEFITS RATIO.

12 ‘‘(a) IN GENERAL.—For purposes of sections

13 3201(b), 3211(b), and 3221(b), the applicable percentage

14 for any calendar year is the percentage determined in ac15 cordance with the table in subsection (b).

16 ‘‘(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
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1 ‘‘(c) DEFINITIONS RELATED TO DETERMINATION OF

2 RATES OF TAX.—

3 ‘‘(1) AVERAGE ACCOUNT BENEFITS RATIO.—

4 For purposes of this section, the term ‘average ac5 count benefits ratio’ means, with respect to any cal6 endar year, the average determined by the Secretary

7 of the account benefits ratios for the 10 most recent

8 fiscal years ending before such calendar year. If the

9 amount determined under the preceding sentence is

10 not a multiple of 0.1, such amount shall be in11 creased to the next highest multiple of 0.1.

12 ‘‘(2) ACCOUNT BENEFITS RATIO.—For pur13 poses of this section, the term ‘account benefits

14 ratio’ means, with respect to any fiscal year, the

15 amount determined by the Railroad Retirement

16 Board by dividing the fair market value of the assets

17 in the Railroad Retirement Account and of the Rail18 road Retirement Investment Trust as of the close of

19 such fiscal year by the total benefits and administra20 tive expenses paid from the Railroad Retirement Ac21 count and administrative expenses of the Railroad

22 Retirement Investment Trust during such fiscal

23 year.

24 ‘‘(d) NOTICE.—No later than December 1 of each

25 calendar year, the Secretary shall publish a notice in the
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1 Federal Register of the rates of tax determined under this

2 section which are applicable for the following calendar

3 year.’’.

4 (e) CONFORMING AMENDMENTS.—

5 (1) Section 24(d)(3)(A)(iii) is amended by

6 striking ‘‘section 3211(a)(1)’’ and inserting ‘‘section

7 3211(a)’’.

8 (2) Section 72(r)(2)(B)(i) is amended by strik9 ing ‘‘section 3211(a)(2)’’ and inserting ‘‘section

10 3211(b)’’.

11 (3) Paragraphs (2)(A)(iii)(II) and (4)(A) of

12 section 3231(e) is amended by striking ‘‘3211(a)(1)’’

13 and inserting ‘‘3211(a)’’.

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

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

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

17 amended by adding at the end the following new

18 item:

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

19 (f) EFFECTIVE DATE.—The amendments made by

20 this section shall apply to calendar years beginning after

21 December 31, 2000.

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