II

Calendar No. 924

106TH CONGRESS

2D SESSION H.R. 4844

[Report No. 106–475]

IN THE SENATE OF THE UNITED STATES

SEPTEMBER 8, 2000

Received; read twice and referred to the Committee on Finance

OCTOBER 3 (legislative day, SEPTEMBER 22), 2000

Reported by Mr. ROTH, with an amendment

[Strike out all after the enacting clause and insert the part printed in italic]

AN ACT

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’’.
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1 (b) TABLE OF CONTENTS.—The table of contents for

2 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 Railroad Retirement Investment Trust.

Sec. 203. Repeal of supplemental annuity tax.

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

3 TITLE I—AMENDMENTS TO RAIL4 ROAD RETIREMENT ACT OF

5 1974

6 SEC. 101. EXPANSION OF WIDOW’S AND WIDOWER’S BENE7 FITS.

8 (a) IN GENERAL.—Section 4(g) of the Railroad Re9 tirement Act of 1974 is amended by adding at the end

10 the following new subdivision:

11 ‘‘(10)(i) If for any month the unreduced annuity pro12 vided under this section for a widow or widower is less

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

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

15 the unreduced annuity shall be increased to that initial
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1 minimum amount. For the purposes of this subdivision,

2 the unreduced annuity is the annuity without regard to

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

4 reduction for entitlement to an annuity under section

5 2(a)(1) of this Act, without regard to any reduction for

6 entitlement to a benefit under title II of the Social Secu7 rity Act, and without regard to any reduction for entitle8 ment to a public service pension pursuant to sections

9 202(e)(7), 202(f)(2), or section 202(g)(4) of the Social Se10 curity Act.

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

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

13 unreduced annuity computed at the time an annuity is

14 awarded to that widow or widower, except that—

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

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

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

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

19 it appears.

20 ‘‘(iii) If a widow or widower who was previously enti21 tled to a widow’s or widower’s annuity under section

22 2(d)(1)(ii) of this Act becomes entitled to a widow’s or

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

24 initial minimum amount shall be computed at the time of
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1 award of the widow’s or widower’s annuity under section

2 2(d)(1)(i) of this Act.’’.

3 (b) EFFECTIVE DATE.—

4 (1) GENERALLY.—The amendment made by

5 this section shall take effect January 1, 2001 and

6 shall apply to annuity amounts accruing for months

7 after December 2000 in the case of annuities award8 ed on or after that date and in the case of annuities

9 awarded before that date if the annuity amount

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

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

12 Public Law 97–35.

13 (2) SPECIAL RULE FOR ANNUITIES AWARDED

14 BEFORE JANUARY 1, 2001.—In applying the amend15 ments made by this section to annuities awarded be16 fore January 1, 2001, the calculation of the initial

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

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

19 widow’s or widower’s annuity.

20 SEC. 102. RETIREMENT AGE RESTORATION.

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

22 Railroad Retirement Act of 1974 is amended by inserting

23 after ‘‘(2)’’ the following: ‘‘For purposes of this sub24 section, individuals entitled to an annuity under section

25 2(a)(1)(ii) of this Act shall, except for the purposes of re-
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1 computations in accordance with section 215(f) of the So2 cial Security Act, be deemed to have attained retirement

3 age (as defined by section 216(l) of the Social Security

4 Act).’’.

5 (b) SPOUSE AND SURVIVOR ANNUITIES.—Section

6 4(a)(2) of the Railroad Retirement Act of 1974 is amend7 ed by striking ‘‘if an’’ and all that follows through ‘‘section

8 2(c)(1) of this Act’’ and inserting ‘‘a spouse entitled to

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

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

11 4(a)(3), and 4(a)(4) of the Railroad Retirement Act are

12 repealed.

13 (d) EFFECTIVE DATES.—

14 (1) GENERALLY.—Except as provided in para15 graph (2), the amendments made by this section

16 shall apply to annuities that begin to accrue on or

17 after January 1, 2001.

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

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

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

21 the date of the enactment of this section, if the an22 nuity amount provided under section 3(a) for the in23 dividual on whose employment record the spouse an24 nuity is based was computed under section 3(a)(3),
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1 as in effect before the date of the enactment of this

2 section.

3 SEC. 103. VESTING REQUIREMENT.

4 (a) CERTAIN ANNUITIES FOR INDIVIDUALS.—Section

5 2(a) of the Railroad Retirement Act of 1974 is amended—

6 (1) by inserting in subdivision (1) ‘‘or, for pur7 poses of paragraphs (i), (iii), and (v), five years of

8 service, all of which accrues after December 31,

9 1995,’’ after ‘‘ten years of service’’; and

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

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

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

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

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

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

16 Act (without regard to section 3(a)(2) of this Act) or sec17 tion 3(f)(3) of this Act. Upon attainment of age 62, such

18 an individual may also be entitled to an annuity amount

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

20 shall be reduced for early retirement in the same manner

21 as if the individual were entitled to an annuity under sec22 tion 2(a)(1)(iii).’’.

23 (b) COMPUTATION RULE FOR INDIVIDUALS’ ANNU24 ITIES.—Section 3(a) of the Railroad Retirement Act of

25 1974, as amended by section 102 of this Act, is further
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1 amended by adding at the end the following new subdivi2 sion:

3 ‘‘(3) If an individual entitled to an annuity under sec4 tion 2(a)(1)(i) or (iii) of this Act on the basis of less than

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

6 202(a), section 202(b), or section 202(c) of the Social Se7 curity Act which began to accrue before the annuity under

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

9 provided such individual under this subsection, shall be

10 computed as though the annuity under this Act began to

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

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

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

14 the individual first met the conditions for entitlement to

15 an age reduced annuity under this Act other than the con16 ditions set forth in sections 2(e)(1) and 2(e)(2) of this Act

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

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

19 Railroad Retirement Act of 1974 is amended by inserting

20 ‘‘or five years of service, all of which accrues after Decem21 ber 31, 1995,’’ after ‘‘ten years of service’’.

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

23 of the Railroad Retirement Act of 1974 is amended by

24 adding at the end the following:
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1 ‘‘(i) An individual entitled to an annuity under this

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

3 which accrues after 1995, but who has not completed ten

4 years of service, and the spouse, divorced spouse, and sur5 vivors of such individual, shall not be entitled to an annu6 ity amount provided under section 3(a), section 4(a), or

7 section 4(f) of this Act unless the individual, or the indi8 vidual’s spouse, divorced spouse, or survivors, would be en9 titled to a benefit under the Social Security Act on the

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

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

12 (e) COMPUTATION RULE FOR SPOUSES’ ANNU13 ITIES.—Section 4(a) of the Railroad Retirement Act of

14 1974, as amended by section 102 of this Act, is further

15 amended by adding at the end the following new subdivi16 sion:

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

18 2(c)(1)(ii)(A), section 2(c)(1)(ii)(C), or section 2(c)(2) of

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

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

21 record of an employee who will have completed less than

22 10 years of service is entitled to a benefit under section

23 202(a), section 202(b), or section 202(c) of the Social Se24 curity Act which began to accrue before the annuity under

25 section 2(c)(1)(ii)(A), section 2(c)(1)(ii)(C), section
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1 2(c)(2), or section 2(c)(4) of this Act, the annuity amount

2 provided under this subsection shall be computed as

3 though the annuity under this Act began to accrue on the

4 later of (A) the date on which the benefit under section

5 202(a), section 202(b), or section 202(c) of the Social Se6 curity Act began or (B) the first date on which the annu7 itant met the conditions for entitlement to an age reduced

8 annuity under this Act other than the conditions set forth

9 in sections 2(e)(1) and 2(e)(2) of this Act and the require10 ment that an application be filed.’’.

11 (f) APPLICATION DEEMING PROVISION.—Section

12 5(b) of the Railroad Retirement Act of 1974 is amended

13 by striking the second sentence and inserting the fol14 lowing: ‘‘An application filed with the Board for an em15 ployee annuity, spouse annuity, or divorced spouse annuity

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

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

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

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

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

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

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

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

24 applicant specified otherwise, be deemed to be an applica-
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1 tion for any benefit to which such applicant may be enti2 tled under this Act or title II of the Social Security Act.’’.

3 (g) CREDITING SERVICE UNDER THE SOCIAL SECU4 RITY ACT.—Section 18(2) of the Railroad Retirement Act

5 of 1974 is amended—

6 (1) by inserting ‘‘or less than five years of serv7 ice, all of which accrues after December 31, 1995,’’

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

9 and

10 (2) by inserting ‘‘or five or more years of serv11 ice, all of which accrues after December 31, 1995,’’

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

13 (h) AUTOMATIC BENEFIT ELIGIBILITY ADJUST14 MENTS.—Section 19 of Railroad Retirement Act of 1974

15 is amended—

16 (1) by inserting ‘‘or five or more years of serv17 ice, all of which accrues after December 31, 1995,’’

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

19 (2) by inserting ‘‘or five or more years of serv20 ice, all of which accrues after December 31, 1995,’’

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

22 (i) CONFORMING AMENDMENTS.—

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

24 Act of 1974 is amended by inserting ‘‘or five or
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1 more years of service, all of which accrues after De2 cember 31, 1995,’’ after ‘‘ten years of service’’.

3 (2) Section 7(b)(2) of the Railroad Retirement

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

5 more years of service, all of which accrues after De6 cember 31, 1995,’’ after ‘‘ten years of service’’.

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

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

10 after ‘‘ten years of service’’.

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

12 this section shall take effect January 1, 2001.

13 SEC. 104. REPEAL OF RAILROAD RETIREMENT MAXIMUM.

14 (a) EMPLOYEE ANNUITIES.—Section 3(f) of the Rail15 road Retirement Act of 1974 is amended by striking para16 graph (1).

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

18 of the Railroad Retirement Act of 1974 is amended by

19 striking subsection (c).

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

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

22 apply to annuity amounts accruing for months after De23 cember 2000.
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1 SEC. 105. INVESTMENT OF RAILROAD RETIREMENT ASSETS.

2 (a) ESTABLISHMENT OF RAILROAD RETIREMENT IN3 VESTMENT TRUST.—Section 15 of the Railroad Retire4 ment Act of 1974 is amended by inserting after subsection

5 (i) the following:

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

7 ‘‘(1) ESTABLISHMENT.—The Railroad Retire8 ment Investment Trust (hereinafter in this sub9 section referred to as the ‘Trust’) is hereby estab10 lished. The Trust shall manage and invest the assets

11 of the Railroad Retirement Trust Fund (hereinafter

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

13 hereby established as a trust organized in the Dis14 trict of Columbia and shall, to the extent not incon15 sistent with this Act, be subject to the laws of the

16 District of Columbia applicable to such trusts.

17 ‘‘(2) NOT A FEDERAL AGENCY OR INSTRUMEN18 TALITY.—The Trust is not a department, agency, or

19 instrumentality of the Government of the United

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

21 States Code.

22 ‘‘(3) BOARD OF TRUSTEES.—

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

24 Board of Trustees, consisting of seven mem25 bers, each appointed by a unanimous vote of

26 the Railroad Retirement Board. The Railroad
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1 Retirement Board may remove any member so

2 appointed by unanimous vote. Of the seven

3 members, three shall represent the interests of

4 labor, three shall represent the interests of

5 management, and one shall represent the inter6 ests of the general public. The members of the

7 Board of Trustees shall not be considered offi8 cers or employees of the Government of the

9 United States.

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

11 Board of Trustees shall be appointed only from

12 among persons who have experience and exper13 tise in the management of financial investments

14 and pension plans. No member of the Railroad

15 Retirement Board shall be eligible to be a mem16 ber of the Board of Trustees.

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

18 subparagraph, each member shall be appointed

19 for a 3-year term. The initial members ap20 pointed under this paragraph shall be divided

21 into three equal groups so nearly as may be, of

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

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

24 year term. A vacancy in the Board of Trustees

25 shall not affect the powers of the Board of
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1 Trustees and shall be filled in the same manner

2 as the selection of the member whose departure

3 caused the vacancy. Upon the expiration of a

4 term of a member of the Board of Trustees,

5 that member shall continue to serve until a suc6 cessor is appointed.

7 ‘‘(4) POWERS OF THE BOARD OF TRUSTEES.—

8 The Board of Trustees shall—

9 ‘‘(A) retain independent advisers to assist

10 it in the formulation and adoption of its invest11 ment guidelines;

12 ‘‘(B) retain independent investment man13 agers to invest the assets of the Fund in a

14 manner consistent with such investment guide15 lines;

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

17 to the policies adopted in subparagraph (A);

18 ‘‘(D) pay administrative expenses of the

19 Fund and the Trust from the money in the

20 Fund; and

21 ‘‘(E) transfer money to the disbursing

22 agent to pay benefits payable under this Act

23 from money in the Fund and administrative ex24 penses related to those benefits.
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1 ‘‘(5) REPORTING REQUIREMENTS AND FIDU2 CIARY STANDARDS.—The following reporting re3 quirements and fiduciary standards shall apply with

4 respect to the Railroad Retirement Trust and the

5 Railroad Retirement Trust Fund (and the assets

6 held in such Trust Fund):

7 ‘‘(A) DUTIES OF THE BOARD OF TRUST8 EES.—The Railroad Retirement Trust and each

9 member of the Board of Trustees shall dis10 charge their duties with respect to the assets of

11 the Fund solely in the interest of the Railroad

12 Retirement Board and through it, the partici13 pants and beneficiaries of the programs funded

14 under this Act—

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

16 ‘‘(I) providing benefits to partici17 pants and their beneficiaries; and

18 ‘‘(II) defraying reasonable ex19 penses of administering the functions

20 of the Trust;

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

22 and diligence under the circumstances then

23 prevailing that a prudent person acting in

24 a like capacity and familiar with such mat25 ters would use in the conduct of an enter-
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1 prise of a like character and with like

2 aims;

3 ‘‘(iii) by diversifying investments so as

4 to minimize the risk of large losses, unless

5 under the circumstances it is clearly pru6 dent not to do so; and

7 ‘‘(iv) in accordance with Trust gov8 erning documents and instruments insofar

9 as such documents and instruments are

10 consistent with this Act.

11 ‘‘(B) PROHIBITIONS WITH RESPECT TO

12 MEMBERS OF THE BOARD OF TRUSTEES.—No

13 member of the Board of Trustees shall—

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

15 in the trustee’s own interest or for the

16 trustee’s own account;

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

18 capacity act in any transaction involving

19 the assets of the Fund on behalf of a party

20 (or represent a party) whose interests are

21 adverse to the interests of the Trust, the

22 Fund, the Railroad Retirement Board, or

23 the interests of participants or bene24 ficiaries; or
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1 ‘‘(iii) receive any consideration for the

2 trustee’s own personal account from any

3 party dealing with the assets of the Fund.

4 ‘‘(C) EXCULPATORY PROVISIONS AND IN5 SURANCE.—Any provision in an agreement or

6 instrument that purports to relieve a trustee

7 from responsibility or liability for any responsi8 bility, obligation or duty under this Act shall be

9 void: Provided, however, That nothing shall

10 preclude—

11 ‘‘(i) the Trust from purchasing insur12 ance for its trustees or for itself to cover

13 liability or losses occurring by reason of

14 the act or omission of a trustee, if such in15 surance permits recourse by the insurer

16 against the trustee in the case of a breach

17 of a fiduciary obligation by such trustee;

18 ‘‘(ii) a trustee from purchasing insur19 ance to cover liability under this section

20 from and for his own account; or

21 ‘‘(iii) an employer or an employee or22 ganization from purchasing insurance to

23 cover potential liability of one or more

24 trustees with respect to their fiduciary re-
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1 sponsibilities, obligations, and duties under

2 this section.

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

4 person who handles funds or other property of

5 the Fund (hereafter in this subsection referred

6 to as ‘Trust official’) shall be bonded. Such

7 bond shall provide protection to the Fund

8 against loss by reason of acts of fraud or dis9 honesty on the part of any Trust official, di10 rectly or through the connivance of others, and

11 shall be in accordance with the following:

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

13 fixed at the beginning of each fiscal year

14 of the Trust by the Railroad Retirement

15 Board. Such amount shall not be less than

16 10 percent of the amount of the funds

17 handled. In no case shall such bond be less

18 than $1,000 nor more than $500,000, ex19 cept that the Railroad Retirement Board,

20 after consideration of the record, may pre21 scribe an amount in excess of $500,000,

22 subject to the 10 per centum limitation of

23 the preceding sentence.

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

25 Trust official to receive, handle, disburse,
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1 or otherwise exercise custody or control of

2 any of the funds or other property of the

3 Fund without being bonded as required by

4 this subsection and it shall be unlawful for

5 any Trust official, or any other person hav6 ing authority to direct the performance of

7 such functions, to permit such functions,

8 or any of them, to be performed by any

9 Trust official, with respect to whom the re10 quirements this subsection have not been

11 met.

12 ‘‘(iii) It shall be unlawful for any per13 son to procure any bond required by this

14 subsection from any surety or other com15 pany or through any agent or broker in

16 whose business operations such person has

17 any control or significant financial interest,

18 direct or indirect.

19 ‘‘(E) AUDIT AND REPORT.—

20 ‘‘(i) The Trust shall annually engage

21 an independent qualified public accountant

22 to audit the financial statements of the

23 Fund.

24 ‘‘(ii) The Trust shall submit an an25 nual management report to the Congress
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1 not later than 180 days after the end of

2 the Trust’s fiscal year. A management re3 port under this subsection shall include—

4 ‘‘(I) a statement of financial po5 sition;

6 ‘‘(II) a statement of operations;

7 ‘‘(III) a statement of cash flows;

8 ‘‘(IV) a statement on internal ac9 counting and administrative control

10 systems;

11 ‘‘(V) the report resulting from an

12 audit of the financial statements of

13 the Trust conducted under subpara14 graph (E)(i); and

15 ‘‘(VI) any other comments and

16 information necessary to inform the

17 Congress about the operations and fi18 nancial condition of the Trust and the

19 Fund.

20 ‘‘(iii) The Trust shall provide the

21 President, the Railroad Retirement Board,

22 and the Director of the Office of Manage23 ment and Budget a copy of the manage24 ment report when it is submitted to Con25 gress.
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1 ‘‘(F) ENFORCEMENT.—The Railroad Re2 tirement Board may bring a civil action—

3 ‘‘(i) to enjoin any act or practice by

4 the Railroad Retirement Investment Trust,

5 its Board of Trustees or its employees or

6 agents that violates any provision of this

7 Act; or

8 ‘‘(ii) to obtain other appropriate relief

9 to redress such violations, or to enforce

10 any provisions of this Act.

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

12 The Board of Trustees shall have the authority to

13 make rules to govern its operations, employ profes14 sional staff, and contract with outside advisers to

15 provide legal, accounting, investment advisory or

16 other services necessary for the proper administra17 tion of this subsection. In the case of contracts with

18 investment advisory services, compensation for such

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

20 such other terms and conditions as are customary

21 for such services.

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

23 Trustees constitute a quorum to do business. Invest24 ment guidelines must be adopted by a unanimous

25 vote of the entire Board of Trustees. All other deci-
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1 sions of the Board of Trustees shall be decided by

2 a majority vote of the quorum present. All decisions

3 of the Board of Trustees shall be entered upon the

4 records of the Board of Trustees.’’.

5 (b) CONFORMING AND TECHNICAL AMENDMENTS

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

7 Railroad Retirement Act of 1974 is amended—

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

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

10 that follows through ‘‘may be made only’’ in the sec11 ond sentence and inserting ‘‘and the Dual Benefits

12 Payments Account as are not transferred to the

13 Railroad Retirement Investment Trust as the Board

14 may determine’’;

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

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

17 and

18 (3) by striking ‘‘the foregoing requirements’’

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

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

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

22 of this section.
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1 SEC. 106. ELIMINATION OF SUPPLEMENTAL ANNUITY AC2 COUNT.

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

4 Railroad Retirement Act of 1974 is amended by striking

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

6 of this Act shall be made from the Railroad Retirement

7 Supplemental Account, and’’.

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

9 the Railroad Retirement Act of 1974 is repealed.

10 (c) IN GENERAL.—Section 15(a) of the Railroad Re11 tirement Act of 1974 is amended by striking ‘‘, except

12 those portions of the amounts covered into the Treasury

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

14 end of the subsection and inserting a period.

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

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

17 the Railroad Retirement Supplemental Account shall con18 tinue to exist until the transfer authorized by the following

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

20 2000, the Board shall determine the balance in the Rail21 road Retirement Supplemental Account and shall direct

22 the Secretary of the Treasury to transfer such amount to

23 the Railroad Retirement Trust Fund and the Secretary

24 shall make such transfer.
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1 SEC. 107. TRANSFER AUTHORITY REVISIONS.

2 (a) RAILROAD RETIREMENT ACCOUNT.—Section 15

3 of the Railroad Retirement Act of 1974 is amended by

4 adding after subsection (j) the following:

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

6 upon establishment of the Railroad Retirement Trust

7 Fund and from time to time thereafter, direct the Sec8 retary of the Treasury to transfer, in such manner as will

9 maximize the investment returns to the Railroad Retire10 ment system, that portion of the Railroad Retirement Ac11 count that is not needed to pay current administrative ex12 penses of the Board to the Railroad Retirement Trust

13 Fund. The Secretary shall make that transfer.’’.

14 (b) RAILROAD RETIREMENT TRUST FUND.—Section

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

16 by subsection (a), is further amended by adding after sub17 section (k) the following:

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

19 Railroad Retirement Trust shall from time to time trans20 fer to the disbursing agent described in section 7(b)(4)

21 such amounts as may be necessary to pay benefits under

22 this Act (other than benefits paid from the Social Security

23 Equivalent Benefit Account or the Dual Benefit Payments

24 Account).’’.
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1 (c) SOCIAL SECURITY EQUIVALENT BENEFIT AC2 COUNT.—Section 15A(d)(2) of the Railroad Retirement

3 Act of 1974 is amended to read as follows:

4 ‘‘(2) Upon establishment of the Railroad Retirement

5 Trust Fund and from time to time thereafter, the Board

6 shall direct the Secretary of the Treasury to transfer, in

7 such manner as will maximize the investment returns to

8 the Railroad Retirement system, the balance of the Social

9 Security Equivalent Benefit Account not needed to pay

10 current benefits required to be paid from that Account to

11 the Railroad Retirement Trust Fund, and the Secretary

12 shall make that transfer. Any balance transferred under

13 this paragraph shall be used by the Railroad Retirement

14 Trust only to pay benefits under this Act or to purchase

15 obligations of the United States that are backed by the

16 full faith and credit of the United States pursuant to

17 chapter 31 of title 31, United States Code. The proceeds

18 of sales of, and the interest income from, such obligations

19 shall be used by the Trust only to pay benefits under this

20 Act.’’.

21 (2) TRANSFERS TO DISBURSING AGENT.—Sec22 tion 15A(c)(1) of the Railroad Retirement Act of

23 1974 is amended by adding at the end the following:

24 ‘‘The Secretary shall from time to time transfer to
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1 the disbursing agent under section 7(b)(4) amounts

2 necessary to pay those benefits.’’.

3 (3) CONFORMING AMENDMENT.—Section

4 15A(d)(1) of the Railroad Retirement Act of 1974

5 is amended by striking the second and third sen6 tences.

7 (d) DUAL BENEFITS PAYMENTS ACCOUNT.—Section

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

9 amended by adding at the end the following: ‘‘The Sec10 retary of the Treasury shall from time to time transfer

11 from the Dual Benefits Payments Account to the dis12 bursing agent under section 7(b)(4) amounts necessary to

13 pay benefits payable from that Account.’’.

14 (e) CERTIFICATION BY THE BOARD AND PAY15 MENT.—Paragraph (4) of section 7(b) of the Railroad Re16 tirement Act of 1974 is amended to read as follows:

17 ‘‘(4)(A) The Railroad Retirement Board, after con18 sultation with the Board of Trustees of the Railroad Re19 tirement Trust and the Secretary of the Treasury, shall

20 enter into an arrangement with a nongovernmental finan21 cial institution to serve as disbursing agent for benefits

22 payable under this Act who shall disburse consolidated

23 benefits under this Act to each recipient.

24 ‘‘(B) The Board shall from time to time certify—
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1 ‘‘(i) to the Secretary of the Treasury the

2 amounts required to be transferred from the Social

3 Security Equivalent Benefit Account and the the

4 Dual Benefits Payments Account to the disbursing

5 agent to make payments of benefits and the Sec6 retary of the Treasury shall transfer those amounts;

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

8 Retirement Investment Trust the amounts required

9 to be transferred from the Railroad Retirement In10 vestment Trust to the disbursing agent to make pay11 ments of benefits and the Board of Trustees shall

12 transfer those amounts; and

13 ‘‘(iii) to the disbursing agent the name and ad14 dress of each individual entitled to receive a pay15 ment, the amount of such payment, and the time at

16 which the payment should be made.’’.

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

18 Railroad Retirement Act of 1974 is amended—

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

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

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

22 from the Railroad Retirement Trust Fund or the So23 cial Security Equivalent Benefit Account, as the case

24 may be’’; and
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1 (2) by inserting ‘‘by the disbursing agent under

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

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

4 (g) TRANSITIONAL RULE FOR EXISTING OBLIGA5 TION.—In making transfers under subsections (a) and (c),

6 the Board shall consult with the Secretary of the Treasury

7 to design an appropriate method to transfer obligations

8 held as of the date of the enactment or to convert such

9 obligations to cash prior to transfer. The Railroad Retire10 ment Trust may hold to maturity any obligations so re11 ceived or may redeem them prior to maturity, as the Trust

12 deems appropriate.

13 SEC. 108. ANNUAL RATIO PROJECTIONS AND CERTIFI14 CATIONS BY THE RAILROAD RETIREMENT

15 BOARD.

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

17 Retirement Act of 1974 is amended—

18 (1) by adding the following sentence after the

19 first sentence: ‘‘On or before May 1 of each year be20 ginning in 2002, the Railroad Retirement Board

21 shall compute its projection of the account benefits

22 ratio and the average account benefits ratio (as de23 fined by section 3241(c) of the Internal Revenue

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

25 fiscal years.’’; and
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1 (2) by striking ‘‘the projection prepared pursu2 ant to the preceding sentence’’ and inserting ‘‘the

3 projections prepared pursuant to the preceding two

4 sentences’’.

5 (b) CERTIFICATIONS.—The Railroad Retirement Act

6 of 1974 is amended by adding at the end the following:

7 ‘‘COMPUTATION AND CERTIFICATION OF ACCOUNT

8 BENEFIT RATIOS

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

10 Railroad Retirement Board shall—

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

12 each of the most recent 10 preceding fiscal years,

13 and

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

15 such fiscal year to the Secretary.

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

17 2002, the Railroad Retirement Board shall—

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

19 fiscal year ending in such year, and

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

21 fiscal year to the Secretary.

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

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

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

25 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 (and for years

19 before 2001, the Social Security Equivalent Benefits

20 Account) as of the close of such fiscal year by the

21 total benefits and administrative expenses paid from

22 the Railroad Retirement Account and the Railroad

23 Retirement Investment Trust during such fiscal

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

2 calendar year, the Secretary shall publish a notice in the

3 Federal Register of the rates of tax determined under this

4 section which are applicable for the following calendar

5 year.’’.

6 (e) CONFORMING AMENDMENTS.—

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

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

9 3211(a)’’.

10 (2) Section 72(r)(2)(B)(i) is amended by strik11 ing ‘‘section 3211(a)(2)’’ and inserting ‘‘section

12 3211(b)’’.

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

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

15 and inserting ‘‘3211(a)’’.

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

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

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

19 amended by adding at the end the following new

20 item:

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

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

22 this section shall apply to calendar years beginning after

23 December 31, 2000.
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1 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

3 ‘‘Railroad Retirement and Survivors’ Improvement Act of

4 2000’’.

5 (b) TABLE OF CONTENTS.—

Sec. 1. Short title; table of contents.

TITLE I—AMENDMENTS TO RAILROAD RETIREMENT ACT OF 1974

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

Sec. 102. Retirement age restoration.

Sec. 103. Vesting requirement.

Sec. 104. Repeal of railroad retirement maximum.

Sec. 105. Investment of railroad retirement assets.

Sec. 106. Elimination of supplemental annuity account.

Sec. 107. Transfer authority revisions.

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

Board.

TITLE II—AMENDMENTS TO THE INTERNAL REVENUE CODE OF

1986

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

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

Sec. 203. Repeal of supplemental annuity tax.

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

6 TITLE I—AMENDMENTS TO RAIL7 ROAD RETIREMENT ACT OF

8 1974

9 SEC. 101. EXPANSION OF WIDOW’S AND WIDOWER’S BENE10 FITS.

11 (a) IN GENERAL.—Section 4(g) of the Railroad Retire12 ment Act of 1974 (45 U.S.C. 231c(g)) is amended by adding

13 at the end the following new subdivision:

14 ‘‘(10)(i) If for any month the unreduced annuity pro15 vided under this section for a widow or widower is less than

16 the widow’s or widower’s initial minimum amount com-
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1 puted pursuant to paragraph (ii) of this subdivision, the

2 unreduced annuity shall be increased to that initial min3 imum amount. For the purposes of this subdivision, the un4 reduced annuity is the annuity without regard to any de5 duction on account of work, without regard to any reduc6 tion for entitlement to an annuity under section 2(a)(1)

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

8 to a benefit under title II of the Social Security Act, and

9 without regard to any reduction for entitlement to a public

10 service pension pursuant to sections 202(e)(7), 202(f)(2), or

11 section 202(g)(4) of the Social Security Act.

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

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

14 unreduced annuity computed at the time an annuity is

15 awarded to that widow or widower, except that—

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

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

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

19 shall be substituted for ‘80 per centum’ both places it

20 appears.

21 ‘‘(iii) If a widow or widower who was previously enti22 tled to a widow’s or widower’s annuity under section

23 2(d)(1)(ii) of this Act becomes entitled to a widow’s or wid24 ower’s annuity under section 2(d)(1)(i) of this Act, a new

25 initial minimum amount shall be computed at the time of
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1 award of the widow’s or widower’s annuity under section

2 2(d)(1)(i) of this Act.’’.

3 (b) EFFECTIVE DATE.—

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

5 section shall take effect on January 1, 2001, and shall

6 apply to annuity amounts accruing for months after

7 December 2000 in the case of annuities awarded—

8 (A) on or after that date; and

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

10 amount under section 4(g) of the Railroad Re11 tirement Act of 1974 (45 U.S.C. 231c(g)) was

12 computed under such section, as amended by the

13 Omnibus Budget Reconciliation Act of 1981

14 (Public Law 97–35; 95 Stat. 357).

15 (2) SPECIAL RULE FOR ANNUITIES AWARDED BE16 FORE JANUARY 1, 2001.—In applying the amendment

17 made by this section to annuities awarded before Jan18 uary 1, 2001, the calculation of the initial minimum

19 amount under section 4(g)(10)(ii) of the Railroad Re20 tirement Act of 1974 (45 U.S.C. 231c(g)(10)(ii)), as

21 added by subsection (a), shall be made as of the date

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

23 SEC. 102. RETIREMENT AGE RESTORATION.

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

25 Railroad Retirement Act of 1974 (45 U.S.C. 231b(a)(2)) is
40

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1 amended by inserting after ‘‘(2)’’ the following new sen2 tence: ‘‘For purposes of this subsection, individuals entitled

3 to an annuity under section 2(a)(1)(ii) of this Act shall,

4 except for the purposes of recomputations in accordance

5 with section 215(f) of the Social Security Act, be deemed

6 to have attained retirement age (as defined by section 216(l)

7 of the Social Security Act).’’.

8 (b) SPOUSE AND SURVIVOR ANNUITIES.—Section

9 4(a)(2) of the Railroad Retirement Act of 1974 (45 U.S.C.

10 231c(a)(2)) is amended by striking ‘‘if an’’ and all that

11 follows through ‘‘section 2(c)(1) of this Act’’ and inserting

12 ‘‘a spouse entitled to an annuity under section

13 2(c)(1)(ii)(B) of this Act’’.

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

15 and 4(a)(4) of the Railroad Retirement Act of 1974 (45

16 U.S.C. 231b(a)(3), 231c(a)(3), and 231c(a)(4)) are re17 pealed.

18 (d) EFFECTIVE DATES.—

19 (1) GENERALLY.—Except as provided in para20 graph (2), the amendments made by this section shall

21 apply to annuities that begin to accrue on or after

22 January 1, 2001.

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

24 provided for a spouse under section 4(a) of the Rail25 road Retirement Act of 1974 (45 U.S.C. 231c(a))
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1 shall be computed under section 4(a)(3) of such Act,

2 as in effect on December 31, 2000, if the annuity

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

4 U.S.C. 231b(a)) for the individual on whose employ5 ment record the spouse annuity is based was com6 puted under section 3(a)(3) of such Act, as in effect

7 on December 31, 2000.

8 SEC. 103. VESTING REQUIREMENT.

9 (a) CERTAIN ANNUITIES FOR INDIVIDUALS.—Section

10 2(a) of the Railroad Retirement Act of 1974 (45 U.S.C.

11 231a(a)) is amended—

12 (1) by inserting in subdivision (1) ‘‘(or, for pur13 poses of paragraphs (i), (iii), and (v), five years of

14 service, all of which accrues after December 31,

15 1995)’’ after ‘‘ten years of service’’, and

16 (2) by adding at the end the following new sub17 division:

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

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

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

21 in which the individual attains age 62, be entitled only to

22 an annuity amount computed under section 3(a) of this Act

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

24 3(f)(3) of this Act. Upon attainment of age 62, such an in25 dividual may also be entitled to an annuity amount com-
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1 puted under section 3(b), but such annuity amount shall

2 be reduced for early retirement in the same manner as if

3 the individual were entitled to an annuity under section

4 2(a)(1)(iii).’’.

5 (b) COMPUTATION RULE FOR INDIVIDUALS’ ANNU6 ITIES.—Section 3(a) of the Railroad Retirement Act of

7 1974 (45 U.S.C. 231b(a)), as amended by section 102 of

8 this Act, is further amended by adding at the end the fol9 lowing new subdivision:

10 ‘‘(3) If an individual entitled to an annuity under sec11 tion 2(a)(1)(i) or (iii) of this Act on the basis of less than

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

13 202(a), section 202(b), or section 202(c) of the Social Secu14 rity Act which began to accrue before the annuity under

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

16 provided such individual under this subsection, shall be

17 computed as though the annuity under this Act began to

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

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

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

21 the individual first met the conditions for entitlement to

22 an age reduced annuity under this Act other than the condi23 tions set forth in sections 2(e)(1) and 2(e)(2) of this Act

24 and the requirement that an application be filed.’’.
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1 (c) SURVIVORS’ ANNUITIES.—Section 2(d)(1) of the

2 Railroad Retirement Act of 1974 (45 U.S.C. 231a(d)(1))

3 is amended by inserting ‘‘(or five years of service, all of

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

5 of service’’.

6 (d) LIMITATION ON ANNUITY AMOUNTS.—Section 2 of

7 the Railroad Retirement Act of 1974 (45 U.S.C. 231a) is

8 amended by adding at the end the following new subsection:

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

10 section who has completed five years of service, all of which

11 accrues after 1995, but who has not completed ten years

12 of service, and the spouse, divorced spouse, and survivors

13 of such individual, shall not be entitled to an annuity

14 amount provided under section 3(a), section 4(a), or section

15 4(f) of this Act unless the individual, or the individual’s

16 spouse, divorced spouse, or survivors, would be entitled to

17 a benefit under title II of the Social Security Act on the

18 basis of the individual’s employment record under both this

19 Act and title II of the Social Security Act.’’.

20 (e) COMPUTATION RULE FOR SPOUSES’ ANNUITIES.—

21 Section 4(a) of the Railroad Retirement Act of 1974 (45

22 U.S.C. 231c(a)), as amended by section 102 of this Act, is

23 further amended by adding at the end the following new

24 subdivision:
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1 ‘‘(3) If a spouse entitled to an annuity under section

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

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

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

5 record of an employee who will have completed less than

6 10 years of service is entitled to a benefit under section

7 202(a), section 202(b), or section 202(c) of the Social Secu8 rity Act which began to accrue before the annuity under

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

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

11 under this subsection shall be computed as though the annu12 ity under this Act began to accrue on the later of (A) the

13 date on which the benefit under section 202(a), section

14 202(b), or section 202(c) of the Social Security Act began

15 or (B) the first date on which the annuitant met the condi16 tions for entitlement to an age reduced annuity under this

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

18 and 2(e)(2) of this Act and the requirement that an applica19 tion be filed.’’.

20 (f) APPLICATION DEEMING PROVISION.—Section 5(b)

21 of the Railroad Retirement Act of 1974 (45 U.S.C. 231d(b))

22 is amended by striking the second sentence and inserting

23 the following new sentence: ‘‘An application filed with the

24 Board for an employee annuity, spouse annuity, or di25 vorced spouse annuity on the basis of the employment
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1 record of an employee who will have completed less than

2 ten years of service shall be deemed to be an application

3 for any benefit to which such applicant may be entitled

4 under this Act or section 202(a), section 202(b), or section

5 202(c) of the Social Security Act. An application filed with

6 the Board for an annuity on the basis of the employment

7 record of an employee who will have completed ten years

8 of service shall, unless the applicant specified otherwise, be

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

10 applicant may be entitled under this Act or title II of the

11 Social Security Act.’’.

12 (g) CREDITING SERVICE UNDER THE SOCIAL SECU13 RITY ACT.—Section 18(2) of the Railroad Retirement Act

14 of 1974 (45 U.S.C. 231q(2)) is amended—

15 (1) by inserting ‘‘(or less than five years of serv16 ice, all of which accrues after December 31, 1995)’’

17 after ‘‘ten years of service’’ each place it appears; and

18 (2) by inserting ‘‘(or five or more years of serv19 ice, all of which accrues after December 31, 1995)’’

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

21 (h) AUTOMATIC BENEFIT ELIGIBILITY ADJUST22 MENTS.—Section 19 of Railroad Retirement Act of 1974

23 (45 U.S.C. 231r) is amended—
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1 (1) by inserting ‘‘(or five or more years of serv2 ice, all of which accrues after December 31, 1995)’’

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

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

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

7 (i) CONFORMING AMENDMENTS.—

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

9 Act of 1974 (45 U.S.C. 231e(1)) is amended by insert10 ing ‘‘(or five or more years of service, all of which ac11 crues after December 31, 1995)’’ after ‘‘ten years of

12 service’’.

13 (2) Section 7(b)(2)(A) of the Railroad Retire14 ment Act of 1974 (45 U.S.C. 231f(b)(2)(A)) is amend15 ed by inserting ‘‘(or five or more years of service, all

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

17 years of service’’.

18 (3) Section 205(i) of the Social Security Act (42

19 U.S.C. 405(i)) is amended by inserting ‘‘(or five or

20 more years of service, all of which accrues after De21 cember 31, 1995)’’ after ‘‘ten years of service’’.

22 (4) Section 6(b)(2) of the Railroad Retirement

23 Act of 1974 (45 U.S.C. 231e(b)(2)) is amended by in24 serting ‘‘(or five or more years of service, all of which
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1 accrues after December 31, 1995)’’ after ‘‘ten years of

2 service’’ the second place it appears.

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

4 section shall take effect on January 1, 2001.

5 SEC. 104. REPEAL OF RAILROAD RETIREMENT MAXIMUM.

6 (a) EMPLOYEE ANNUITIES.—

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

8 Retirement Act of 1974 (45 U.S.C. 231b(f)) is

9 amended—

10 (A) by striking subdivision (1); and

11 (B) by redesignating subdivisions (2) and

12 (3) as subdivisions (1) and (2), respectively.

13 (2) CONFORMING AMENDMENTS.—

14 (A) The first sentence of section 3(f)(1) of

15 the Railroad Retirement Act of 1974 (45 U.S.C.

16 231b(f)(1)), as redesignated by paragraph

17 (1)(B), is amended by striking ‘‘, without regard

18 to the provisions of subdivision (1) of this sub19 section,’’.

20 (B) Paragraphs (i) and (ii) of section

21 7(d)(2) of the Railroad Retirement Act of 1974

22 (45 U.S.C. 231f(d)(2)) are each amended by

23 striking ‘‘section 3(f)(3)’’ and inserting ‘‘section

24 3(f)(2)’’.
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1 (b) SPOUSE AND SURVIVOR ANNUITIES.—Section 4 of

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

3 amended by striking subsection (c).

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

5 section shall take effect on January 1, 2001, and shall apply

6 to annuity amounts accruing for months after December

7 2000.

8 SEC. 105. INVESTMENT OF RAILROAD RETIREMENT ASSETS.

9 (a) ESTABLISHMENT OF RAILROAD RETIREMENT IN10 VESTMENT TRUST.—Section 15 of the Railroad Retirement

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

12 subsection (i) the following new subsection:

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

14 ‘‘(1) ESTABLISHMENT.—The Railroad Retire15 ment Investment Trust (hereafter in this subsection

16 referred to as the ‘Trust’) is hereby established as a

17 Trust domiciled in the District of Columbia and

18 shall, to the extent not inconsistent with this Act, be

19 subject to the laws of the District of Columbia appli20 cable to such trusts. The Trust shall manage and in21 vest its assets in the manner set forth in this sub22 section.

23 ‘‘(2) NOT A FEDERAL AGENCY OR INSTRUMEN24 TALITY.—The Trust is not a department, agency, or

25 instrumentality of the Government of the United
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1 States and shall not be subject to title 31, United

2 States Code.

3 ‘‘(3) BOARD OF TRUSTEES.—

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

5 Board of Trustees, consisting of 7 members, each

6 appointed by a unanimous vote of the Railroad

7 Retirement Board. The Railroad Retirement

8 Board may remove any member so appointed by

9 unanimous vote. Of the 7 members, 3 shall rep10 resent the interests of labor, 3 shall represent the

11 interests of management, and 1 shall represent

12 the interests of the general public. The members

13 of the Board of Trustees shall not be considered

14 officers or employees of the Government of the

15 United States.

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

17 Board of Trustees shall be appointed only from

18 among persons who have experience and exper19 tise in the management of financial investments

20 and pension plans. No member of the Railroad

21 Retirement Board shall be eligible to be a mem22 ber of the Board of Trustees.

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

24 subparagraph, each member shall be appointed

25 for a 3-year term. The initial members ap-
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1 pointed under this paragraph shall be divided

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

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

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

5 term. A vacancy in the Board of Trustees shall

6 not affect the powers of the Board of Trustees

7 and shall be filled in the same manner as the se8 lection of the member whose departure caused the

9 vacancy. Upon the expiration of a term of a

10 member of the Board of Trustees, that member

11 shall continue to serve until a successor is ap12 pointed.

13 ‘‘(4) POWERS OF THE BOARD OF TRUSTEES.—

14 The Board of Trustees shall—

15 ‘‘(A) retain independent advisers to assist it

16 in the formulation and adoption of its invest17 ment guidelines;

18 ‘‘(B) retain independent investment man19 agers to invest the assets of the Trust in a man20 ner consistent with such investment guidelines;

21 ‘‘(C) invest assets of the Trust, pursuant to

22 the policies adopted in subparagraph (A);

23 ‘‘(D) pay administrative expenses of the

24 Trust from the assets of the Trust; and
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1 ‘‘(E) transfer money to the disbursing agent

2 or as otherwise provided in section 7(b)(4), to

3 pay benefits payable under this Act from the as4 sets of the Trust.

5 ‘‘(5) REPORTING REQUIREMENTS AND FIDUCIARY

6 STANDARDS.—The following reporting requirements

7 and fiduciary standards shall apply with respect to

8 the Trust:

9 ‘‘(A) DUTIES OF THE BOARD OF TRUST10 EES.—The Trust and each member of the Board

11 of Trustees shall discharge their duties with re12 spect to the assets of the Trust solely in the inter13 est of the Railroad Retirement Board and

14 through it, the participants and beneficiaries of

15 the programs funded under this Act—

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

17 ‘‘(I) providing benefits to partici18 pants and their beneficiaries; and

19 ‘‘(II) defraying reasonable ex20 penses of administering the functions

21 of the Trust;

22 ‘‘(ii) with the care, skill, prudence, and

23 diligence under the circumstances then pre24 vailing that a prudent person acting in a

25 like capacity and familiar with such mat-
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1 ters would use in the conduct of an enter2 prise of a like character and with like aims;

3 ‘‘(iii) by diversifying investments so as

4 to minimize the risk of large losses, unless

5 under the circumstances it is clearly pru6 dent not to do so; and

7 ‘‘(iv) in accordance with Trust gov8 erning documents and instruments insofar

9 as such documents and instruments are con10 sistent with this Act.

11 ‘‘(B) PROHIBITIONS WITH RESPECT TO

12 MEMBERS OF THE BOARD OF TRUSTEES.—No

13 member of the Board of Trustees shall—

14 ‘‘(i) deal with the assets of the Trust in

15 the trustee’s own interest or for the trustee’s

16 own account;

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

18 capacity act in any transaction involving

19 the assets of the Trust on behalf of a party

20 (or represent a party) whose interests are

21 adverse to the interests of the Trust, the

22 Railroad Retirement Board, or the interests

23 of participants or beneficiaries; or
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1 ‘‘(iii) receive any consideration for the

2 trustee’s own personal account from any

3 party dealing with the assets of the Trust.

4 ‘‘(C) EXCULPATORY PROVISIONS AND INSUR5 ANCE.—Any provision in an agreement or in6 strument that purports to relieve a trustee from

7 responsibility or liability for any responsibility,

8 obligation or duty under this Act shall be void:

9 Provided, however, That nothing shall

10 preclude—

11 ‘‘(i) the Trust from purchasing insur12 ance for its trustees or for itself to cover li13 ability or losses occurring by reason of the

14 act or omission of a trustee, if such insur15 ance permits recourse by the insurer against

16 the trustee in the case of a breach of a fidu17 ciary obligation by such trustee;

18 ‘‘(ii) a trustee from purchasing insur19 ance to cover liability under this section

20 from and for his own account; or

21 ‘‘(iii) an employer or an employee or22 ganization from purchasing insurance to

23 cover potential liability of one or more

24 trustees with respect to their fiduciary re-
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•HR 4844 RS

1 sponsibilities, obligations, and duties under

2 this section.

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

4 person who handles funds or other property of

5 the Trust (hereafter in this subsection referred to

6 as ‘Trust official’) shall be bonded. Such bond

7 shall provide protection to the Trust against loss

8 by reason of acts of fraud or dishonesty on the

9 part of any Trust official, directly or through the

10 connivance of others, and shall be in accordance

11 with the following:

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

13 fixed at the beginning of each fiscal year of

14 the Trust by the Railroad Retirement

15 Board. Such amount shall not be less than

16 10 percent of the amount of the funds han17 dled. In no case shall such bond be less than

18 $1,000 nor more than $500,000, except that

19 the Railroad Retirement Board, after con20 sideration of the record, may prescribe an

21 amount in excess of $500,000, subject to the

22 10 percent limitation of the preceding sen23 tence.

24 ‘‘(ii) It shall be unlawful for any Trust

25 official to receive, handle, disburse, or other-
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•HR 4844 RS

1 wise exercise custody or control of any of

2 the funds or other property of the Trust

3 without being bonded as required by this

4 subsection and it shall be unlawful for any

5 Trust official, or any other person having

6 authority to direct the performance of such

7 functions, to permit such functions, or any

8 of them, to be performed by any Trust offi9 cial, with respect to whom the requirements

10 of this subsection have not been met.

11 ‘‘(iii) It shall be unlawful for any per12 son to procure any bond required by this

13 subsection from any surety or other com14 pany or through any agent or broker in

15 whose business operations such person has

16 any control or significant financial interest,

17 direct or indirect.

18 ‘‘(E) AUDIT AND REPORT.—

19 ‘‘(i) The Trust shall annually engage

20 an independent qualified public accountant

21 to audit the financial statements of the

22 Trust.

23 ‘‘(ii) The Trust shall submit an annual

24 management report to the Congress not

25 later than 180 days after the end of the
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•HR 4844 RS

1 Trust’s fiscal year. A management report

2 under this subsection shall include—

3 ‘‘(I) a statement of financial posi4 tion;

5 ‘‘(II) a statement of operations;

6 ‘‘(III) a statement of cash flows;

7 ‘‘(IV) a statement on internal ac8 counting and administrative control

9 systems;

10 ‘‘(V) the report resulting from an

11 audit of the financial statements of the

12 Trust conducted under clause (i); and

13 ‘‘(VI) any other comments and in14 formation necessary to inform the Con15 gress about the operations and finan16 cial condition of the Trust.

17 ‘‘(iii) The Trust shall provide the

18 President, the Railroad Retirement Board,

19 and the Director of the Office of Manage20 ment and Budget a copy of the management

21 report when it is submitted to Congress.

22 ‘‘(F) ENFORCEMENT.—The Railroad Retire23 ment Board may bring a civil action—

24 ‘‘(i) to enjoin any act or practice by

25 the Trust, its Board of Trustees or its em-
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•HR 4844 RS

1 ployees or agents that violates any provi2 sion of this Act; or

3 ‘‘(ii) to obtain other appropriate relief

4 to redress such violations, or to enforce any

5 provisions of this Act.

6 ‘‘(6) APPLICATION OF FIDUCIARY STANDARDS TO

7 RAILROAD RETIREMENT BOARD.—

8 ‘‘(A) IN GENERAL.—The provisions of para9 graph (5)(A) shall apply to the members of the

10 Railroad Retirement Board in the discharge of

11 their duty to appoint the members of the Board

12 of Trustees under paragraph (3)(A) in the same

13 manner as such provisions apply to the members

14 of the Board of Trustees.

15 ‘‘(B) ENFORCEMENT.—For purposes of this

16 paragraph, the provisions of paragraph (5)(F)

17 shall apply by substituting ‘the Secretary of

18 Labor’ for ‘the Railroad Retirement Board’.

19 ‘‘(7) 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 pro23 vide legal, accounting, investment advisory or other

24 services necessary for the proper administration of

25 this subsection. In the case of contracts with invest-
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1 ment advisory services, compensation for such services

2 may be on a fixed contract fee basis or on such other

3 terms and conditions as are customary for such serv4 ices.

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

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

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

9 the Board of Trustees shall be decided by a majority

10 vote of the quorum present. All decisions of the Board

11 of Trustees shall be entered upon the records of the

12 Board of Trustees.

13 ‘‘(9) FUNDING.—The expenses of the Trust and

14 the Board of Trustees incurred under this subsection

15 shall be paid from the Trust.’’.

16 (b) CONFORMING AND TECHNICAL AMENDMENTS GOV17 ERNING INVESTMENTS.—Subsection 15(e) of the Railroad

18 Retirement Act of 1974 (45 U.S.C. 231n(e)) is amended—

19 (1) in the first sentence, by striking ‘‘, the Dual

20 Benefits Payments Account’’ and all that follows

21 through ‘‘may be made only’’ in the second sentence

22 and inserting ‘‘and the Dual Benefits Payments Ac23 count as are not transferred to the Railroad Retire24 ment Investment Trust as the Board may determine’’;
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1 (2) by striking ‘‘the Second Liberty Bond Act, as

2 amended’’ and inserting ‘‘chapter 31 of title 31’’; and

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

4 inserting ‘‘the requirements of this subsection’’.

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

6 section shall take effect on the date of enactment of this sec7 tion.

8 SEC. 106. ELIMINATION OF SUPPLEMENTAL ANNUITY AC9 COUNT.

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

11 Railroad Retirement Act of 1974 (45 U.S.C. 231f(c)(1)) is

12 amended by striking ‘‘payments of supplemental annuities

13 under section 2(b) of this Act shall be made from the Rail14 road Retirement Supplemental Account, and’’.

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

16 Railroad Retirement Act of 1974 (45 U.S.C. 231n(c)) is re17 pealed.

18 (c) AMENDMENT TO RAILROAD RETIREMENT AC19 COUNT.—Section 15(a) of the Railroad Retirement Act of

20 1974 (45 U.S.C. 231n(a)) is amended by striking ‘‘, except

21 those portions of the amounts covered into the Treasury

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

23 end of the subsection and inserting a period.

24 (d) TRANSFER.—
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1 (1) DETERMINATION.—As soon as possible after

2 December 31, 2000, the Railroad Retirement Board

3 shall—

4 (A) determine the amount of funds in the

5 Railroad Retirement Supplemental Account

6 under section 15(c) of the Railroad Retirement

7 Act of 1974 (45 U.S.C. 231n(c)) as of the date

8 of such determination; and

9 (B) direct the Secretary of the Treasury to

10 transfer such funds to the Railroad Retirement

11 Investment Trust under section 15(j) of such Act

12 (as added by section 105).

13 (2) TRANSFER BY SECRETARY OF THE TREAS14 URY.—The Secretary of the Treasury shall make the

15 transfer described in paragraph (1).

16 (e) EFFECTIVE DATE.—

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

18 amendments made by subsections (a), (b), and (c)

19 shall take effect January 1, 2001.

20 (2) ACCOUNT IN EXISTENCE UNTIL TRANSFER

21 MADE.—The Railroad Retirement Supplemental Ac22 count under section 15(c) of the Railroad Retirement

23 Act of 1974 (45 U.S.C. 231n(c)) shall continue to

24 exist until the date that the Secretary of the Treasury

25 makes the transfer described in subsection (d)(2).
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1 SEC. 107. TRANSFER AUTHORITY REVISIONS.

2 (a) RAILROAD RETIREMENT ACCOUNT.—Section 15 of

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

4 amended by adding after subsection (j) the following new

5 subsection:

6 ‘‘(k) TRANSFERS TO THE TRUST.—The Board shall,

7 upon establishment of the Railroad Retirement Investment

8 Trust and from time to time thereafter, direct the Secretary

9 of the Treasury to transfer, in such manner as will maxi10 mize the investment returns to the Railroad Retirement sys11 tem, that portion of the Railroad Retirement Account that

12 is not needed to pay current administrative expenses of the

13 Board to the Railroad Retirement Investment Trust. The

14 Secretary shall make that transfer.’’.

15 (b) TRANSFERS FROM THE RAILROAD RETIREMENT

16 INVESTMENT TRUST.—Section 15 of the Railroad Retire17 ment Act of 1974 (45 U.S.C. 231n), as amended by sub18 section (a), is further amended by adding after subsection

19 (k) the following new subsection:

20 ‘‘(l) RAILROAD RETIREMENT INVESTMENT TRUST.—

21 The Railroad Retirement Investment Trust shall from time

22 to time transfer to the disbursing agent described in section

23 7(b)(4), or as otherwise directed by the Railroad Retirement

24 Board pursuant to section 7(b)(4), such amounts as may

25 be necessary to pay benefits under this Act (other than bene-
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1 fits paid from the Social Security Equivalent Benefit Ac2 count or the Dual Benefit Payments Account).’’.

3 (c) SOCIAL SECURITY EQUIVALENT BENEFIT AC4 COUNT.—

5 (1) TRANSFERS TO TRUST.—Section 15A(d)(2) of

6 the Railroad Retirement Act of 1974 (45 U.S.C.

7 231n–1(d)(2)) is amended to read as follows:

8 ‘‘(2) Upon establishment of the Railroad Retirement

9 Investment Trust and from time to time thereafter, the

10 Board shall direct the Secretary of the Treasury to transfer,

11 in such manner as will maximize the investment returns

12 to the Railroad Retirement system, the balance of the Social

13 Security Equivalent Benefit Account not needed to pay cur14 rent benefits and administrative expenses required to be

15 paid from that Account to the Railroad Retirement Invest16 ment Trust, and the Secretary shall make that transfer.

17 Any balance transferred under this paragraph shall be used

18 by the Railroad Retirement Investment Trust only to pay

19 benefits under this Act or to purchase obligations of the

20 United States that are backed by the full faith and credit

21 of the United States pursuant to chapter 31 of title 31,

22 United States Code. The proceeds of sales of, and the inter23 est income from, such obligations shall be used by the Trust

24 only to pay benefits under this Act.’’.
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1 (2) TRANSFERS TO DISBURSING AGENT.—Section

2 15A(c)(1) of the Railroad Retirement Act of 1974 (45

3 U.S.C. 231n–1(c)(1)) is amended by adding at the

4 end the following new sentence: ‘‘The Secretary shall

5 from time to time transfer to the disbursing agent

6 under section 7(b)(4) amounts necessary to pay those

7 benefits.’’.

8 (3) CONFORMING AMENDMENT.—Section

9 15A(d)(1) of the Railroad Retirement Act of 1974 (45

10 U.S.C. 231n–1(d)(1)) is amended by striking the sec11 ond and third sentences.

12 (d) DUAL BENEFITS PAYMENTS ACCOUNT.—Section

13 15(d)(1) of the Railroad Retirement Act of 1974 (45 U.S.C.

14 231n(d)(1)) is amended by adding at the end the following

15 new sentence: ‘‘The Secretary of the Treasury shall from

16 time to time transfer from the Dual Benefits Payments Ac17 count to the disbursing agent under section 7(b)(4) amounts

18 necessary to pay benefits payable from that Account.’’.

19 (e) CERTIFICATION BY THE BOARD AND PAYMENT.—

20 Paragraph (4) of section 7(b) of the Railroad Retirement

21 Act of 1974 (45 U.S.C. 231f(b)(4)) is amended to read as

22 follows:

23 ‘‘(4)(A) The Railroad Retirement Board, after con24 sultation with the Board of Trustees of the Railroad Retire25 ment Investment Trust and the Secretary of the Treasury,
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1 shall enter into an arrangement with a nongovernmental

2 financial institution to serve as disbursing agent for bene3 fits payable under this Act who shall disburse consolidated

4 benefits under this Act to each recipient. Pending the taking

5 effect of that arrangement, the Railroad Retirement Board

6 shall make appropriate provision for the payment of bene7 fits due under this Act and otherwise payable through that

8 arrangement.

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

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

11 required to be transferred from the Social Security

12 Equivalent Benefit Account and the Dual Benefits

13 Payments Account to the disbursing agent to make

14 payments of benefits and the Secretary of the Treas15 ury shall transfer those amounts;

16 ‘‘(ii) to the Board of Trustees of the Railroad Re17 tirement Investment Trust the amounts required to be

18 transferred from the Railroad Retirement Investment

19 Trust to the disbursing agent to make payments of

20 benefits and the Board of Trustees shall transfer those

21 amounts; and

22 ‘‘(iii) to the disbursing agent the name and ad23 dress of each individual entitled to receive a payment,

24 the amount of such payment, and the time at which

25 the payment should be made.’’.
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1 (f) BENEFIT PAYMENTS.—Section 7(c)(1) of the Rail2 road Retirement Act of 1974 (45 U.S.C. 231f(c)(1)) is

3 amended—

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

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

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

7 from the Railroad Retirement Investment Trust or the

8 Social Security Equivalent Benefit Account, as the

9 case may be’’; and

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

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

12 ‘‘Public Law 93–445 shall be made’’.

13 (g) TRANSITIONAL RULE FOR EXISTING OBLIGA14 TION.—In making transfers under sections 15(k) and

15 15A(d)(2) of the Railroad Retirement Act of 1974, as

16 amended by subsections (a) and (c), respectively, the Rail17 road Retirement Board shall consult with the Secretary of

18 the Treasury to design an appropriate method to transfer

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

20 to convert such obligations to cash prior to transfer. The

21 Railroad Retirement Investment Trust may hold to matu22 rity any obligations so received or may redeem them prior

23 to maturity, as the Trust deems appropriate.
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1 SEC. 108. ANNUAL RATIO PROJECTIONS AND CERTIFI2 CATIONS BY THE RAILROAD RETIREMENT

3 BOARD.

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

5 Retirement Act of 1974 (45 U.S.C. 231u(a)(1)) is

6 amended—

7 (1) by inserting after the first sentence the fol8 lowing new sentence: ‘‘On or before May 1 of each

9 year beginning in 2002, the Railroad Retirement

10 Board shall compute its projection of the account ben11 efits ratio and the average account benefits ratio (as

12 defined by section 3241(c) of the Internal Revenue

13 Code of 1986) for each of the next succeeding five fis14 cal years.’’; and

15 (2) by striking ‘‘the projection prepared pursu16 ant to the preceding sentence’’ and inserting ‘‘the pro17 jections prepared pursuant to the preceding two sen18 tences’’.

19 (b) CERTIFICATIONS.—The Railroad Retirement Act of

20 1974 (45 U.S.C. 231 et seq.) is amended by adding at the

21 end the following new section:

22 ‘‘COMPUTATION AND CERTIFICATION OF ACCOUNT BENEFIT

23 RATIOS

24 ‘‘SEC. 23. (a) INITIAL COMPUTATION AND CERTIFI25 CATION.—On or before November 1, 2002, the Railroad Re26 tirement Board shall—
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1 ‘‘(1) compute the account benefits ratios for each

2 of the most recent 10 preceding fiscal years, and

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

4 such fiscal year to the Secretary.

5 ‘‘(b) COMPUTATIONS AND CERTIFICATIONS AFTER

6 2002.—On or before November 1 of each year after 2002,

7 the Railroad Retirement Board shall—

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

9 fiscal year ending in such year, and

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

11 fiscal year to the Secretary of the Treasury.

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

13 ‘account benefits ratio’ has the meaning given that term in

14 section 3241(c) of the Internal Revenue Code of 1986.’’.

15 TITLE II—AMENDMENTS TO THE

16 INTERNAL REVENUE CODE OF

17 1986

18 SEC. 201. AMENDMENTS TO THE INTERNAL REVENUE CODE

19 OF 1986.

20 Except as otherwise provided, whenever in this title

21 an amendment or repeal is expressed in terms of an amend22 ment to, or repeal of, a section or other provision, the ref23 erence shall be considered to be made to a section or other

24 provision of the Internal Revenue Code of 1986.
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1 SEC. 202. EXEMPTION FROM TAX FOR RAILROAD RETIRE2 MENT INVESTMENT TRUST.

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

4 at the end the following new paragraph:

5 ‘‘(28) The Railroad Retirement Investment Trust

6 established under section 15(j) of the Railroad Retire7 ment Act of 1974.’’.

8 SEC. 203. REPEAL OF SUPPLEMENTAL ANNUITY TAX.

9 (a) REPEAL OF TAX ON EMPLOYEE REPRESENTA10 TIVES.—Section 3211 is amended by striking subsection (b).

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

12 is amended by striking subsections (c) and (d) and by redes13 ignating subsection (e) as subsection (c).

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

15 section shall apply to calendar years beginning after De16 cember 31, 2000.

17 SEC. 204. EMPLOYER, EMPLOYEE REPRESENTATIVE, AND

18 EMPLOYEE TIER 2 TAX RATE ADJUSTMENTS.

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

20 section 3221 is amended to read as follows:

21 ‘‘(b) TIER 2 TAX.—

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

23 there is hereby imposed on every employer an excise

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

25 equal to the applicable percentage of the compensation
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1 paid during any calendar year by such employer for

2 services rendered to such employer.

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

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

5 means—

6 ‘‘(A) 15.6 percent in the case of compensa7 tion paid during 2001,

8 ‘‘(B) 14.2 percent in the case of compensa9 tion paid during 2002, and

10 ‘‘(C) in the case of compensation paid dur11 ing any calendar year after 2002, the percentage

12 determined under section 3241 for such calendar

13 year.’’.

14 (b) RATE OF TAX ON EMPLOYEE REPRESENTA15 TIVES.—Section 3211, as amended by section 203, is

16 amended by striking subsection (a) and inserting the fol17 lowing new subsections:

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

19 is hereby imposed on the income of each employee represent20 ative a tax equal to the applicable percentage of the com21 pensation received during any calendar year by such em22 ployee representative for services rendered by such employee

23 representative. For purposes of the preceding sentence, the

24 term ‘applicable percentage’ means the percentage equal to

25 the sum of the rates of tax in effect under subsections (a)
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1 and (b) of section 3101 and subsections (a) and (b) of sec2 tion 3111 for the calendar year.

3 ‘‘(b) TIER 2 TAX.—

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

5 there is hereby imposed on the income of each em6 ployee representative a tax equal to the applicable

7 percentage of the compensation received during any

8 calendar year by such employee representatives for

9 services rendered by such employee representative.

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

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

12 means—

13 ‘‘(A) 14.75 percent in the case of compensa14 tion received during 2001,

15 ‘‘(B) 14.20 percent in the case of compensa16 tion received during 2002, and

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

18 during any calendar year after 2002, the per19 centage determined under section 3241 for such

20 calendar year.

21 ‘‘(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).’’.

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

23 section 3201 is amended to read as follows:

24 ‘‘(b) TIER 2 TAX.—
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•HR 4844 RS

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

2 there is hereby imposed on the income of each em3 ployee a tax equal to the applicable percentage of the

4 compensation received during any calendar year by

5 such employee for services rendered by such employee.

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

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

8 means—

9 ‘‘(A) 4.90 percent in the case of compensa10 tion received during 2001 or 2002, and

11 ‘‘(B) in the case of compensation received

12 during any calendar year after 2002, the per13 centage determined under section 3241 for such

14 calendar year.’’.

15 (d) DETERMINATION OF RATE.—Chapter 22 is amend16 ed by adding at the end the following new subchapter:

17 ‘‘Subchapter E—Tier 2 Tax Rate

18 Determination

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

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

20 ON AVERAGE ACCOUNT BENEFITS RATIO.

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

22 3211(b), and 3221(b), the applicable percentage for any cal23 endar year is the percentage determined in accordance with

24 the table in subsection (b).
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•HR 4844 RS

1 ‘‘(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

2 ‘‘(c) DEFINITIONS RELATED TO DETERMINATION OF

3 RATES OF TAX.—

4 ‘‘(1) AVERAGE ACCOUNT BENEFITS RATIO.—For

5 purposes of this section, the term ‘average account

6 benefits ratio’ means, with respect to any calendar

7 year, the average determined by the Secretary of the

8 account benefits ratios for the 10 most recent fiscal

9 years ending before such calendar year. If the amount

10 determined under the preceding sentence is not a mul11 tiple of 0.1, such amount shall be increased to the

12 next highest multiple of 0.1.

13 ‘‘(2) ACCOUNT BENEFITS RATIO.—For purposes

14 of this section, the term ‘account benefits ratio’

15 means, with respect to any fiscal year, the amount

16 determined by the Railroad Retirement Board by di17 viding the fair market value of the assets in the Rail-
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•HR 4844 RS

1 road Retirement Account and of the Railroad Retire2 ment Investment Trust (and for years before 2001, the

3 Social Security Equivalent Benefits Account) as of

4 the close of such fiscal year by the total benefits and

5 administrative expenses paid from the Railroad Re6 tirement Account and the Railroad Retirement In7 vestment Trust during such fiscal year.

8 ‘‘(d) NOTICE.—Not later than December 1 of each cal9 endar year, the Secretary shall publish a notice in the Fed10 eral Register of the rates of tax determined under this sec11 tion which are applicable for the following calendar year.’’.

12 (e) CONFORMING AMENDMENTS.—

13 (1) Section 24(d)(3)(A)(iii) is amended by strik14 ing ‘‘section 3211(a)(1)’’ and inserting ‘‘section

15 3211(a)’’.

16 (2) Section 72(r)(2)(B)(i) is amended by striking

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

18 (3) Paragraphs (2)(A)(iii)(II) and (4)(A) of sec19 tion 3231(e) are amended by striking ‘‘3211(a)(1)’’

20 and inserting ‘‘3211(a)’’.

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

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

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

24 amended by adding at the end the following new item:

‘‘Subchapter E. Tier 2 tax rate determination.’’.
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•HR 4844 RS

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

2 section shall apply to calendar years beginning after De3 cember 31, 2000.

Calendar No. 924

106TH CONGRESS

2D SESSION H. R. 4844

[Report No. 106–475]

AN ACT

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

employees and beneficiaries.

OCTOBER 3 (legislative day, SEPTEMBER 22), 2000

Reported with an amendment