I

106TH CONGRESS

2D SESSION H. R. 5387

To provide a transition for railroad workers to the Social Security Program,

and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

OCTOBER 4, 2000

Mr. SMITH of Michigan introduced the following bill; which was referred to

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

on Transportation and Infrastructure, 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

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.

4 This Act may be cited as the ‘‘Railroad Retirement

5 Reform Act of 2000’’.

6 SEC. 2. PROTECTION OF SOCIAL SECURITY FUNDS.

7 (a) IN GENERAL.—Section 15A(d)(2) of the Railroad

8 Retirement Act of 1974 (45 U.S.C. 231n–1(d)(2)) is

9 amended to read as follows:
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1 ‘‘(2) No funds may be transferred from the Social

2 Security Equivalent Benefit Account to the Railroad Re3 tirement Account or the Railroad Retirement Trust Fund,

4 and such funds may only be used for the purposes de5 scribed in subsection (c)(1).’’.

6 (b) CONFORMING AMENDMENT.—Section 15A(c)(1)

7 of the Railroad Retirement Act of 1974 (45 U.S.C. 231n–

8 1(c)(1)) is amended by striking ‘‘Except as otherwise pro9 vided in this section, amounts’’ and inserting ‘‘Amounts’’.

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

11 this section shall take effect on October 1, 2000.

12 SEC. 3. TRANSITION TO FULL SOCIAL SECURITY COVERAGE

13 OF RAILROAD EMPLOYMENT.

14 (a) RAILROAD WORKERS IN SOCIAL SECURITY SYS15 TEM.—

16 (1) IN GENERAL.—Section 210(a)(9) of the So17 cial Security Act (42 U.S.C. 410(a)(9)) is amended

18 by inserting ‘‘before January 1, 2002’’ after ‘‘per19 formed’’.

20 (2) PAYMENT OF FICA TAXES.—

21 (A) IN GENERAL.—Section 3121(b)(9) of

22 the Internal Revenue Code of 1986 (defining

23 employment) is amended by inserting ‘‘before

24 January 1, 2002’’ after ‘‘performed’’.

25 (B) NO IMPOSITION OF TIER 1 TAXES.—
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1 (i) Section 3201(a) of such Code is

2 amended by adding at the end the fol3 lowing: ‘‘This subsection shall not apply to

4 service performed in calendar years after

5 2001.’’.

6 (ii) Section 3211(a)(1) of such Code

7 is amended by adding at the end the fol8 lowing: ‘‘This paragraph shall not apply to

9 service performed in calendar years after

10 2001.’’.

11 (iii) Section 3221(a) of such Code is

12 amended by adding at the end the fol13 lowing: ‘‘This subsection shall not apply to

14 service performed in calendar years after

15 2001.’’.

16 (b) RAILROAD RETIREES IN SOCIAL SECURITY SYS17 TEM.—

18 (1) RECEIPT OF SOCIAL SECURITY BENEFITS.—

19 Notwithstanding any other provision of law, with re20 spect to any individual who applies for a benefit

21 under the Railroad Retirement Act of 1974 after

22 December 31, 2002, based on such individual’s rail23 road employment or another individual’s railroad

24 employment, such individual shall receive a cor25 responding benefit (or an increased benefit) under
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1 the Social Security Act determined by treating such

2 employment as included in the term ‘‘employment’’

3 as defined in the Social Security Act.

4 (2) CORRESPONDING REDUCTION IN RAILROAD

5 RETIREMENT BENEFIT.—With respect to any indi6 vidual described in paragraph (1), any benefit other7 wise receivable under the Railroad Retirement Act of

8 1974 shall be reduced by the benefit (or the increase

9 in the benefit) described in such paragraph.

10 (3) EFFECT ON FINANCIAL INTERCHANGE.—In

11 calculating any financial interchange between the so12 cial security system and the railroad retirement sys13 tem, the Commissioner of Social Security and the

14 Railroad Retirement Board shall take into account

15 the provisions of, and the amendments made by, this

16 section.

17 (4) OPTIONAL PAYMENT OF SOCIAL SECURITY

18 BENEFITS BY RAILROAD RETIREMENT BOARD.—

19 (A) IN GENERAL.—Subject to subpara20 graph (B), at the election of Railroad Retire21 ment Board, social security benefits described

22 in paragraph (1) for railroad retirees may be

23 paid by the Board on behalf of the Social Secu24 rity Administration.
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1 (B) REQUIREMENTS FOR ANNUAL ELEC2 TIONS.—The Railroad Retirement Board may

3 elect annually to continue making benefit pay4 ments described in subparagraph (A), if the

5 Commissioner of Social Security certifies that

6 the Board is paying such benefits on-time and

7 is providing high quality customer service to all

8 new retirees.

9 (5) TECHNICAL AND CONFORMING CHANGES.—

10 The Commissioner of Social Security, the Railroad

11 Retirement Board, and the Secretary of the Treas12 ury, as soon as practicable but in any event not later

13 than 180 days after the date of enactment of this

14 Act, submit to the Committee on Ways and Means

15 of the House of Representatives and the Committee

16 on Finance of the Senate a draft of any technical

17 and conforming changes in the Social Security Act,

18 the Railroad Retirement Act of 1974, and the Inter19 nal Revenue Code of 1986 which are necessary to re20 flect throughout such Acts and Code the changes in

21 the substantive provisions of law made by this sec22 tion.
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1 SEC. 4. REPEAL OF GENERAL FUND SUBSIDY TO RAILROAD

2 RETIREMENT ACCOUNT.

3 (a) REPEAL.—Subsection (c)(1)(A) of section 224 of

4 the Railroad Retirement Solvency Act of 1983 is repealed.

5 (b) EFFECTIVE DATE.—The repeal made by sub6 section (a) shall take effect on October 1, 2000.

7 SEC. 5. EMPLOYER, EMPLOYEE REPRESENTATIVE, AND EM8 PLOYEE TIER 2 TAX RATE ADJUSTMENTS.

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

10 of section 3221 of the Internal Revenue Code of 1986 is

11 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 every employer an excise

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

16 equal to the applicable percentage of the compensa17 tion paid during any calendar year by such employer

18 for services rendered to such employer.

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

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

21 means the percentage determined under section

22 3241 for such calendar year.’’.

23 (b) RATE OF TAX ON EMPLOYEE REPRESENTA24 TIVES.—Paragraph (2) of section 3211(a) of the Internal

25 Revenue Code of 1986 is amended to read as follows:

26 ‘‘(2) TIER 2 TAX.—
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1 ‘‘(A) IN GENERAL.—In addition to other

2 taxes, there is hereby imposed on the income of

3 each employee representative a tax equal to the

4 applicable percentage of the compensation re5 ceived during any calendar year by such em6 ployee representatives for services rendered by

7 such employee representative.

8 ‘‘(B) APPLICABLE PERCENTAGE.—For

9 purposes of subparagraph (A), the term ‘appli10 cable percentage’ means the percentage deter11 mined under section 3241 for such calendar

12 year.’’.

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

14 of section 3201 of the Internal Revenue Code of 1986 is

15 amended to read as follows:

16 ‘‘(b) TIER 2 TAX.—

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

18 there is hereby imposed on the income of each em19 ployee a tax equal to the applicable percentage of

20 the compensation received during any calendar year

21 by such employee for services rendered by such em22 ployee.

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

24 of paragraph (1), the term ‘applicable percentage’
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1 means the percentage determined under section

2 3241 for such calendar year.’’.

3 (d) DETERMINATION OF RATE.—Chapter 22 of the

4 Internal Revenue Code of 1986 is amended by adding at

5 the end the following new subchapter:

6 ‘‘Subchapter E—Tier 2 Tax Rate

7 Determination

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

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

9 ON AVERAGE ACCOUNT BENEFITS RATIO.

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

11 3201(b), 3211(a)(2), and 3221(b), the applicable percent12 age for any calendar year is the percentage determined

13 in accordance with the table in subsection (b).

14 ‘‘(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)

1.0 31.1 4.9

1.0 1.5 28.1 4.9

1.5 2.0 25.1 4.9

2.0 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 as of the close

18 of such fiscal year by the total benefits and adminis19 trative expenses paid from the Railroad Retirement

20 Account during such fiscal year.

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

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

23 Federal Register of the rates of tax determined under this

24 section which are applicable for the following calendar

25 year.’’.
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1 (e) CONFORMING AMENDMENT.—The table of sub2 chapters for chapter 22 of the Internal Revenue Code of

3 1986 is amended by adding at the end the following new

4 item:

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

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

6 this section shall apply to calendar years beginning after

7 December 31, 2002.

8 SEC. 6. TRANSITION TO A PRIVATE RAILROAD PENSION

9 FUND.

10 (a) TRANSMISSION OF PROPOSAL.—The labor and

11 management members of the Railroad Retirement Board

12 shall transmit a plan by June 1, 2001, to the Secretary

13 of Labor for a multiemployer pension plan for individuals

14 who would otherwise be covered by the Railroad Retire15 ment Act of 1974.

16 (b) FUNDING OF PLAN.—If the plan described in

17 subsection (a) is certified by the Secretary of Labor by

18 October 1, 2001, as a bona fide plan—

19 (1) the Secretary of the Treasury shall make an

20 annual payment (on or before December 31, begin21 ning with 2001) from the Railroad Retirement Ac22 count to the fund relating to such plan in an amount

23 specified by the Secretary of Labor (on or before

24 December 1, beginning with 2001) as being the min25 imum amount necessary (taking into consideration
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1 any funding deposited into such fund pursuant to

2 subsection (e)) to assure—

3 (A) full funding for all new entrants using

4 Employee Retirement Income Security Act

5 funding standards;

6 (B) full funding of all accruing pension ob7 ligations for benefits elected to be included in

8 the plan under subsection (d)(1) (if any) using

9 Employee Retirement Income Security Act

10 funding standards; and

11 (C) adequate funding to meet the on-going

12 pension payments for any Railroad Retirement

13 Act pension obligations that have been trans14 ferred to the plan under subsection (d)(2) (if

15 any); and

16 (2) notwithstanding any other provision of law,

17 the new entrants shall no longer be entitled to bene18 fits under the Railroad Retirement Act of 1974.

19 (c) CERTIFICATION REQUIREMENTS.—

20 (1) IN GENERAL.—For purposes of subsection

21 (b), to be certified by the Secretary of Labor as a

22 bona fide plan, the plan must

23 (A) provide a defined benefit pension plan

24 for all new entrants; and
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1 (B) meet fiduciary and other requirements

2 of the Employee Retirement Income Security

3 Act of 1974 deemed necessary and applicable

4 by the Secretary of Labor.

5 (2) NEW ENTRANT.—For purposes of this sec6 tion, a new entrant is a person hired after December

7 31, 2001, who would otherwise be covered by the

8 Railroad Retirement Act of 1974 and who has never

9 previously been covered by such Act.

10 (d) OPTIONAL ELEMENTS OF PLAN.—

11 (1) ADDITIONAL BENEFITS.—The plan sub12 mitted to the Secretary of Labor may include provi13 sion of pension benefits for persons other than new

14 entrants (and auxiliary beneficiaries of new en15 trants), if such benefits are fully funded under the

16 standards of the Employee Retirement Income Secu17 rity Act of 1974.

18 (2) TRANSFER OF EXISTING OBLIGATIONS.—

19 The plan may also include the transfer of existing

20 Railroad Retirement Act pension obligations (other

21 than social security equivalent benefit obligations).

22 To transfer these pensions obligations, the Railroad

23 Retirement Board must certify to the Secretary of

24 Labor, for each individual beneficiary affected by

25 such transfer, that the beneficiary will get his or her
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1 pension payment from the plan in lieu of a payment

2 from the Railroad Retirement Account.

3 (e) AGREED PLAN DEPOSITS.—Employers and em4 ployees covered by the multiemployer pension plan cer5 tified under this section may directly deposit pension fund

6 contributions into the fund and such deposits shall be

7 taken into consideration by the Secretary of Labor for

8 purposes of the payment amount specified in subsection

9 (b).

10 SEC. 7. REPEAL OF 4.3-CENT MOTOR FUEL EXCISE TAXES

11 ON RAILROADS AND INLAND WATERWAY

12 TRANSPORTATION WHICH REMAIN IN GEN13 ERAL FUND.

14 (a) TAXES ON TRAINS.—

15 (1) IN GENERAL.—Subparagraph (A) of section

16 4041(a)(1) of the Internal Revenue Code of 1986 is

17 amended by striking ‘‘or a diesel-powered train’’

18 each place it appears and by striking ‘‘or train’’.

19 (2) CONFORMING AMENDMENTS.—

20 (A) Subparagraph (C) of section

21 4041(a)(1) of such Code is amended by striking

22 clause (ii) and by redesignating clause (iii) as

23 clause (ii).

24 (B) Subparagraph (C) of section

25 4041(b)(1) of such Code is amended by striking
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1 all that follows ‘‘section 6421(e)(2)’’ and insert2 ing a period.

3 (C) Subsection (d) of section 4041 of such

4 Code is amended by redesignating paragraph

5 (3) as paragraph (4) and by inserting after

6 paragraph (2) the following new paragraph:

7 ‘‘(3) DIESEL FUEL USED IN TRAINS.—There is

8 hereby imposed a tax of 0.1 cent per gallon on any

9 liquid other than gasoline (as defined in section

10 4083)—

11 ‘‘(A) sold by any person to an owner, les12 see, or other operator of a diesel-powered train

13 for use as a fuel in such train, or

14 ‘‘(B) used by any person as a fuel in a die15 sel-powered train unless there was a taxable

16 sale of such fuel under subparagraph (A).

17 No tax shall be imposed by this paragraph on the

18 sale or use of any liquid if tax was imposed on such

19 liquid under section 4081.’’

20 (D) Subsection (f) of section 4082 of such

21 Code is amended by striking ‘‘section

22 4041(a)(1)’’ and inserting ‘‘subsections (d)(3)

23 and (a)(1) of section 4041, respectively’’.
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1 (E) Paragraph (3) of section 4083(a) of

2 such Code is amended by striking ‘‘or a diesel3 powered train’’.

4 (F) Paragraph (3) of section 6421(f) of

5 such Code is amended to read as follows:

6 ‘‘(3) GASOLINE USED IN TRAINS.—In the case

7 of gasoline used as a fuel in a train, this section

8 shall not apply with respect to the Leaking Under9 ground Storage Tank Trust Fund financing rate

10 under section 4081.’’

11 (G) Paragraph (3) of section 6427(l) of

12 such Code is amended to read as follows:

13 ‘‘(3) REFUND OF CERTAIN TAXES ON FUEL

14 USED IN DIESEL-POWERED TRAINS.—For purposes

15 of this subsection, the term ‘nontaxable use’ includes

16 fuel used in a diesel-powered train. The preceding

17 sentence shall not apply to the tax imposed by sec18 tion 4041(d) and the Leaking Underground Storage

19 Tank Trust Fund financing rate under section 4081

20 except with respect to fuel sold for exclusive use by

21 a State or any political subdivision thereof.’’

22 (b) FUEL USED ON INLAND WATERWAYS.—

23 (1) IN GENERAL.—Paragraph (1) of section

24 4042(b) of such Code is amended by adding ‘‘and’’

25 at the end of subparagraph (A), by striking ‘‘, and’’
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1 at the end of subparagraph (B) and inserting a pe2 riod, and by striking subparagraph (C).

3 (2) CONFORMING AMENDMENT.—Paragraph (2)

4 of section 4042(b) of such Code is amended by strik5 ing subparagraph (C).

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

7 this section shall take effect on October 1, 2000.

Æ