RAILROAD 

RETIREMENT 

BOARD 

Additional Controls 

and Oversight of 

Financial Interchange 

Transfers Needed 

Report to Congressional Requesters

April 2018

GAO-18-323

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-18-323, a report to 

congressional requesters

April 2018

RAILROAD RETIREMENT BOARD

Additional Controls and Oversight of Financial 

Interchange Transfers Needed

What GAO Found

Established in 1937, the Railroad Retirement Board (RRB) administers

retirement and disability benefits for rail workers and their families. A financial 

interchange between RRB and the Social Security Administration (SSA) was 

created in 1951, which as GAO previously reported, helped finance RRB benefits 

as they increased over time to keep pace with growing Social Security benefits to 

individuals. Through its financial interchange calculation, RRB takes steps each 

year to estimate the amount of funds that would have flowed in and out of Social 

Security’s trust funds if rail beneficiaries were covered by Social Security instead 

of RRB. Five key steps go into the annual calculation:

• RRB is credited for (1) the estimated amount of benefits it would have paid to 

beneficiaries under SSA rules, (2) administrative costs, and (3) interest 

accrued on the financial interchange amount.

• SSA is credited for the revenues it would have received from rail workers if 

they paid into Social Security; specifically, (4) payroll taxes and (5) income

taxes paid on benefits received.

The determined net amounts are transferred between the agencies, which since 

1958 have been from SSA to RRB each year. RRB received $4.1 billion in fiscal 

year 2016, almost one-third of the $12.4 billion in retirement and disability 

benefits it paid that year. The financial interchange was expanded to Medicare in 

1965 to facilitate funding of Medicare benefits to rail workers; RRB transfers 

Medicare payroll taxes collected, income taxes paid on benefits received, and 

interest, minus administrative costs to the Department of Health and Human 

Services (HHS).

A high ratio of beneficiaries to active railroad workers primarily explains the net

transfers from Social Security’s trust funds to RRB each year since 1958. Rail 

employment has fallen steadily since World War II, and the number of 

beneficiaries has exceeded the number of workers since 1961. RRB had 2.7

beneficiaries for every worker in 2015. As a result, RRB has paid out more in

benefits than it has collected in payroll taxes and projects this to continue for the 

foreseeable future.

RRB takes a number of steps each year to ensure the accuracy of its 

calculations, such as checking that the sample of cases used to estimate benefit

payments is complete, reviewing the work of new employees, and using 

electronic alerts to help prevent staff from entering incorrect information into its 

computer system. SSA and HHS also conduct high-level reviews of the 

calculation results to identify any significant changes from one year to the next. 

However, RRB’s process includes manual data entry and its electronic edit 

checks cannot flag entries that are incorrect but plausible, which could lead to 

calculation errors. RRB also has limited documentation of its calculation process, 

and does not have formal policies on how staff should address some potential 

calculation errors and on how supervisors should review staff work. This is 

contrary to internal control standards for having quality data and documenting

procedures. In terms of SSA and HHS, they do not currently review case-level 

calculations made by RRB, and cannot reasonably ensure that work used to 

determine the transfers they made and received is correct.

View GAO-18-323. For more information, 

contact Elizabeth Curda at (202) 512-7215 or 

curdae@gao.gov.

Why GAO Did This Study

RRB collects payroll taxes and 

administers retirement, disability, and 

Medicare benefits for rail workers and 

their families. A financial interchange 

exists between RRB, SSA, and HHS in 

order to put the trust funds for these 

benefits in the same financial position 

as if Social Security covered rail 

workers. RRB generally transfers to 

the Social Security and Hospital 

Insurance trust funds the taxes that 

would be collected from rail workers 

and employers, while SSA provides 

RRB the benefits that would otherwise 

be paid directly to rail workers. GAO 

was asked to review the financial 

interchange calculation process.

This report examines (1) the steps 

taken to calculate financial interchange 

amounts, (2) factors that could account 

for trends in transfers over time, and 

(3) the extent to which RRB, SSA, and 

HHS provide oversight to ensure 

calculations are accurate. GAO 

reviewed agency policies, procedures, 

and regulations; observed RRB staff 

calculating four cases selected for

beneficiary type; reviewed data on 

payment and beneficiary trends; and 

interviewed agency officials.

What GAO Recommends

GAO makes eight recommendations, 

including that RRB create formal 

policies and improve documentation of 

its processes, work with SSA to obtain 

data electronically, and that SSA and 

HHS increase their oversight. RRB and 

SSA agreed, while HHS did not, 

asserting that statute limits its 

authority; however, HHS continues to 

review this issue. HHS should seek 

this authority if it determines it 

necessary.
Page i GAO-18-323 RRB Financial Interchange

Letter 1

Background 3

RRB Calculates Financial Interchange Amounts by Approximating 

Key Flows In and Out of SSA and HHS Trust Funds 6

High Ratio of Beneficiaries to Rail Workers Has Resulted in 

Transfers From SSA to RRB Each Year Since 1958 12

RRB Takes Measures to Oversee the Financial Interchange 

Calculation, but Shortcomings Increase the Risk of Errors 18

Conclusions 24

Recommendations for Executive Action 25

Agency Comments and Our Evaluation 25

Appendix I Comments from the Railroad Retirement Board 28

Appendix II Comments from the Social Security Administration 30

Appendix III Comments from the Department of Health and Human Services 32

Appendix IV GAO Contact and Staff Acknowledgments 34

Table

Table 1: Comparison of Benefits Eligibility for Rail and Other 

Workers 5

Figures

Figure 1: Social Security Financial Interchange Calculation, Fiscal 

Year 2016 7

Figure 2: Process for Railroad Retirement Board Staff to Calculate 

the Benefits Portion of the Financial Interchange with the 

Social Security Administration (SSA) 9

Figure 3: Medicare Financial Interchange Calculation for HHS and 

RRB, Fiscal Year 2016 11

Figure 4: Benefits Paid, Payroll Taxes as Calculated in the 

Financial Interchange, and Funds Transferred from the 

Contents
Page ii GAO-18-323 RRB Financial Interchange

Social Security Administration (SSA) to the Railroad 

Retirement Board (RRB), Calendar Years 1958 through 

2015 (in constant 2016 billions of dollars) 13

Figure 5: Rail Workers Compared to Beneficiaries Calendar Years 

1937 through 2016 15

Figure 6: Net Financial Interchange Transfers from the Railroad 

Retirement Board (RRB) to the Department of Health and 

Human Services (HHS), Calendar Years 1966 through 

2015, (in constant 2016 millions of dollars) 17

Abbreviations

DI Disability Insurance

HHS Department of Health and Human Services

OASI Old-Age and Survivors Insurance

RRB Railroad Retirement Board

SSA Social Security Administration

T&P total and permanent disability

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Page 1 GAO-18-323 RRB Financial Interchange

441 G St. N.W.

Washington, DC 20548

April 19, 2018

The Honorable Sam Johnson

Chairman

Subcommittee on Social Security

Committee on Ways and Means

House of Representatives

The Honorable Trey Gowdy

Chairman

Committee on Oversight and Government Reform

House of Representatives

The Honorable Mark Meadows

Chairman

Subcommittee on Government Operations

Committee on Oversight and Government Reform

House of Representatives

Established in 1937, the Railroad Retirement Board (RRB) administers 

retirement and disability benefits for rail workers and their families. After 

Medicare was enacted in 1965, RRB began administering these benefits 

for rail employees and their families. For most other workers in the United 

States, the Social Security Administration (SSA) administers retirement 

and disability benefits and the Department of Health and Human Services 

(HHS) administers Medicare benefits.

We previously reported that the 1951 amendments to the Railroad 

Retirement Act of 1937 substantially increased railroad retirement 

benefits to bring them in line with benefit increases granted to individuals 

under Social Security, and that a financial interchange was created 

between the agencies in 1951 to help pay for these increases.1 The 

financial interchange was expanded in 1965 to include HHS. The financial 

interchange is intended to put the Old-Age and Survivors (OASI),

Disability Insurance (DI)—which finance retirement and disability benefits 

respectively—and Hospital Insurance trust funds in the same position that

they would have been had railroad employment been covered under the 

 1

GAO, Railroad Retirement: Federal Financial Involvement, GAO/HRD-86-88 

(Washington, DC.: May 9, 1986).

Letter
Page 2 GAO-18-323 RRB Financial Interchange

Social Security Act and the Federal Insurance Contributions Act.2

Through this financial interchange, RRB typically receives sizable 

transfers each year from the OASI and DI trust funds and transfers funds 

to the Hospital Insurance Trust Fund. In fiscal year 2016, RRB reported 

that it received about $4.1 billion in transfers from the OASI and DI trust 

funds—about one-third of the $12.4 billion it paid in retirement and 

disability benefits.3

You asked us to review the financial interchange calculation process. This 

report examines:

1. What steps does RRB take to calculate financial interchange 

amounts?

2. What factors, if any, account for the trends in transfers between RRB, 

SSA, and HHS through the financial interchange?

3. To what extent do the agencies provide oversight to ensure that 

financial interchange transfer amounts are accurate?

To address the first objective we reviewed RRB guidance and 

documentation to determine the methodology RRB uses for its financial 

interchange calculations, as well as assessments of the soundness of the 

methodology. We also observed RRB staff while they conducted 

calculations on four non-generalizable four cases—selected to provide 

variation in terms of the type of benefits being received—to determine the 

steps taken by staff.

To address the second objective, we analyzed data on the amounts of 

financial interchange transfers from calendar year 1951 to 2015, the 

number of RRB beneficiaries from fiscal year 1937 to 2016, and the 

number of rail workers from calendar year 1937 to 2016, the most recent 

available data. We assessed the reliability of these data by reviewing 

 2

The law states that the financial interchange is to place the Old-Age and Survivors 

Insurance Trust Fund, the Disability Insurance Trust Fund, and the Hospital Insurance 

Trust Fund in the same position they would have been if (1) service as an employee after 

December 31, 1936 had been included in the term “employment” as defined in the Social 

Security Act, and in the Federal Insurance Contributions Act and (2) the Railroad 

Retirement Act of 1935, as amended, had not been enacted. In this report we refer to this 

position as one in which the relevant individuals were “covered under Social Security.”

3

The $4.1 billion RRB reported it received in 2016 differs from the result of the financial 

interchange calculation. The result of the calculation is determined on a cash basis and 

the amount received is reported on an accrual basis.
Page 3 GAO-18-323 RRB Financial Interchange

RRB documentation regarding internal controls and interviewing 

knowledgeable officials. We determined that the data on the number of 

beneficiaries and workers were sufficiently reliable for our purposes. We 

determined that the data we report on the amounts of financial 

interchange transfers were sufficiently reliable for our purposes of 

discussing trends in transfers over time.

To address the third objective, we reviewed agency policies, procedures, 

and documentation. We also observed RRB staff demonstrate, on the

four illustrative cases described above, the safeguards to prevent errors 

that are built into the system they use to compute financial interchange 

amounts. We compared these steps taken by the agencies to criteria for 

using quality data and documenting agency procedures in standards for 

internal controls in the federal government.

For all three objectives, we reviewed relevant federal laws and 

regulations, and interviewed staff at the three agencies to provide 

additional context.

We conducted this performance audit from January 2017 to April 2018 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

The rail industry was one of the first to pioneer private pensions for its 

employees in the late 19th century, and by the 1930s, these pensions 

were more developed than in most other industries. However, according 

to RRB, these private rail pensions had serious defects that were 

magnified by the effects of the Great Depression. For instance, RRB 

noted that the plans were generally inadequately financed and that 

employers could terminate the plans at will. In prior work, we noted that 

the Railroad Retirement Act of 1937 was enacted at the urging of rail 

labor and established the national railroad retirement system 

administered by RRB.4 The program was to be solely supported by 

employees and employers of the rail industry through payroll taxes. 

 4

GAO/HRD-86-88.

Background
Page 4 GAO-18-323 RRB Financial Interchange

According to RRB, this system was created separately from Social 

Security for several reasons. For instance, RRB notes that Social 

Security—created in 1935—would not begin payments for several years 

or credit workers for work prior to 1937, while the deteriorating state of 

private rail pensions called for immediate retirement payments based on 

prior service.

We previously reported that the 1951 amendments to the Railroad 

Retirement Act of 1937 substantially increased railroad retirement 

benefits to bring them in line with benefit increases granted to individuals 

under Social Security, and that a financial interchange was created 

between the agencies in 1951 to help pay for these increases.5 RRB 

annually computes the amounts that SSA would have collected in taxes 

from rail workers and their employers, and what SSA would have paid in 

benefits if rail workers had been covered under Social Security, with the 

net difference transferred between the agencies. The amounts computed 

under the financial interchange do not necessarily represent the actual 

RRB benefits paid to rail workers and their beneficiaries. RRB determined 

that it was due a net transfer from SSA each year since 1958.

Financial interchange transfers make up a significant portion of the 

financing for RRB’s retirement, disability, and survivors benefits. In fiscal 

year 2016, RRB paid about $12.4 billion in these benefits and collected 

$5.9 billion in payroll taxes from rail employees and employers. RRB 

reported that the remainder of its funding for these benefits came from the 

financial interchange ($4.1 billion), transfers from the National Railroad 

Retirement Investment Trust ($1.4 billion),6 income taxes collected on 

RRB benefits ($758 million), and other funding sources, such as 

appropriations. The interchange also serves as a vehicle to fund 

Medicare Part A (Hospital Insurance) benefits for rail workers.

The benefits provided by RRB consist of a core-level of benefits that are 

similar to those available to most workers covered under Social Security, 

including Medicare. Rail workers also receive a second level of retirement 

benefits that approximate payments from private pension plans (see table 

1).

 5

GAO/HRD-86-88.

6

The National Railroad Retirement Investment Trust (NRRIT) was established in 2002 to 

manage and invest railroad retirement assets. RRB generally draws on this trust to pay for 

Tier II retirement benefits, which are benefits above and beyond Social Security equivalent 

retirement benefits. 
Page 5 GAO-18-323 RRB Financial Interchange

Table 1: Comparison of Benefits Eligibility for Rail and Other Workers

Railroad Retirement 

Board (RRB) Benefit

Equivalent Benefit for

Workers Covered Under 

Social Security

RRB Benefit Included in 

Financial Interchange? 

Disability Benefits Total and Permanent Disability (T&P):

Provides payments to individuals who 

have been determined to have a physical 

or mental impairment that lasts one year 

or is expected to result in death or last at 

least one year and prevents them from 

engaging in substantial gainful activity.

Social Security Disability 

Insurance (DI): Same disability 

criteria as T&P; generally pays 

the same benefits. Both are 

financed by payroll taxes at the 

same rates, which are levied on 

employees and employers.

Yes.

Occupational Disability: Provides 

payments to individuals whose physical or 

mental condition makes them unable to 

perform their specific railroad job. Benefits 

are paid at the same rate as T&P.

No equivalent. Sometimes. According to 

RRB, although there is no 

equivalent benefit under the 

Social Security Act, SSA 

reviews Occupational 

Disability claims to determine 

if the individuals would 

qualify under DI rules. Those 

that do are included in the 

interchange calculation.

Retirement Benefits Tier I Retirement: Provides benefits to 

retirees, spouses, and survivors.

Old Age and Survivors 

Insurance (OASI): Generally 

pays benefits at the same rate as 

Tier I. Both are financed by 

payroll taxes at the same rates, 

which are levied on employees 

and employers.

Yes.

Tier II Retirement: Paid in addition to Tier 

I retirement for some workers; resembles 

a comparable private defined benefit 

pension. Financed by additional payroll 

taxes on railroad employees and 

employers, and by withdrawals from the 

National Railroad Retirement Investment 

Trust.

No equivalent. No.

Medicare Medicare: Identical to benefits available 

to other workers.

Medicare: Identical to benefits 

available to rail workers.

Yes, Medicare Hospital 

Insurance payroll taxes are 

included.

Source: GAO analysis of relevant federal laws and regulations, and SSA and RRB documents and interview with knowledgeable RRB officials. | GAO-18-323

For non-rail workers, Social Security and Medicare benefits are paid from 

their respective trust funds:

• Retirement benefits are paid from SSA’s OASI Trust Fund;

• Disability benefits are paid from SSA’s DI Trust Fund; and
Page 6 GAO-18-323 RRB Financial Interchange

• Medicare Part A benefits are paid from the Hospital Insurance Trust 

Fund.7

The financial interchange is intended to place Social Security’s OASI and 

DI Trust Funds and HHS’s Hospital Insurance Trust Fund on the same 

financial footing as if rail workers and beneficiaries were covered under 

Social Security instead of by RRB.8 Regarding Social Security, RRB is 

credited for what it paid beneficiaries, administrative costs involved with 

paying benefits, and interest for the time between the determination of the 

interchange amount and its actual transfer.9 SSA is credited for the 

amount of payroll and income taxes it would have collected from rail 

workers and for income taxes that would have been paid by RRB 

beneficiaries on Social Security equivalent benefits. The net of the five 

amounts is the amount that is transferred (see fig. 1). A net transfer from 

SSA to RRB means that rail workers would have been a net draw on 

SSA’s trust funds if covered under Social Security. RRB calculates the 

financial interchange amount each year, which is done on a retrospective 

basis, i.e., the amount is determined for the previous fiscal year. By law, 

the agencies must complete their determination by June of each year.10

 7

The Hospital Insurance Trust Fund helps pay for services covered under Medicare Part 

A, such as hospital care. It is funded primarily through payroll taxes. Medicare Parts B and 

D, which help pay for services such as doctor visits and prescription drugs, respectively, 

are paid for by the Supplementary Medical Insurance Trust Fund. It is financed primarily 

by transfers from the general fund and by monthly premiums paid by beneficiaries. Only 

Medicare Part A is part of the financial interchange.

8

The law states that the financial interchange is to place the Old-Age and Survivors 

Insurance Trust Fund, the Disability Insurance Trust Fund, and the Hospital Insurance 

Trust Fund in the same position they would have been if (1) service as an employee after 

December 31, 1936 had been included in the term “employment” as defined in the Social 

Security Act, and in the Federal Insurance Contributions Act and (2) the Railroad 

Retirement Act of 1935, as amended, had not been enacted. In this report we refer to this 

position as one in which the relevant individuals were “covered under Social Security.”

9

The methodology used to compute the interchange is documented in an annual financial 

interchange report produced by RRB. 

1045 U.S.C. § 231f(c)(2).

RRB Calculates 

Financial Interchange 

Amounts by 

Approximating Key 

Flows In and Out of 

SSA and HHS Trust 

Funds
Page 7 GAO-18-323 RRB Financial Interchange

Figure 1: Social Security Financial Interchange Calculation, Fiscal Year 2016

Note: The 2016 determination also included a $230 million adjustment for pre-1957 military service in 

which military service performed by rail workers was credited to RRB, but the individuals did not 

accrue the benefits necessary to earn a railroad retirement annuity. The amount was credited to SSA. 

According to RRB, the $4.5 billion shown above is calculated on a cash basis and the amount 

transferred, as reported in RRB’s annual report ($4.1 billion), is reported on an accrual basis.

In keeping with the purpose of keeping the OASI and DI trust funds in the 

same place as if rail workers were covered under Social Security, RRB 

determines the retirement and disability benefits that rail workers and 

dependents would have received if they were covered under Social 

Security. Specifically, RRB uses railroad earnings data provided by 

employers to replicate SSA’s benefits calculations.11 Although the basic 

retirement and disability benefits that SSA and RRB pay to their 

beneficiaries are based on the same formulas, there are several eligibility 

differences between the two programs.12 For instance, a rail worker may 

receive unreduced retirement benefits at age 60 after 30 years of work, 

whereas the earliest most workers covered under Social Security can 

begin receiving retirement benefits is at age 62.13 According to RRB 

 11Employers are required to provide data on gross earnings to RRB on an ongoing basis.

12Specifically, we are referring to Tier I retirement benefits and total and permanent

disability benefits, which are similar to OASI and DI benefits, respectively. According to 

RRB officials, occupational disability benefits are sometimes included in the financial 

interchange calculation. Occupational benefits are paid to individuals who are no longer 

able to perform their specific job, as opposed to total and permanent benefits, which are 

paid to individuals determined unable to engage in any substantial gainful activity. For 

RRB-approved occupational disability cases, RRB will ask SSA to review the cases and 

determine if the individuals would have qualified for benefits under DI eligibility rules. If 

SSA determines that the individual would have qualified for benefits under SSA rules, 

those benefits are potentially included in the financial interchange if they fall within the 

benefits sample. Tier II retirement benefits are not considered in the financial interchange 

calculation.

13Social Security recipients receive a reduced benefit if they retire and begin receiving 

benefits at age 62. 

Benefits
Page 8 GAO-18-323 RRB Financial Interchange

officials, even though a 60-year-old railroad worker may be receiving RRB 

retirement benefits, RRB would not receive credit through the interchange 

for that individual. Once that individual turns 62, RRB determines the 

amount of reduced Social Security retirement benefits for which he or she 

would have been eligible, given the person’s earnings history and Social 

Security’s benefits rules.14 According to RRB officials, the agency 

receives a credit through the interchange for this amount even though the 

individual is receiving full RRB retirement benefits.

To account for these potential differences, RRB officials said that the 

agency must make calculations for individual RRB cases. Additionally, 

RRB officials said that in light of the number of RRB cases—nearly 

400,000—it is not practical to make these calculations annually for each 

case.15 Instead, RRB uses SSA rules to calculate benefits for a subset of 

RRB cases in which the worker’s Social Security number ends in 30, 

which approximates a 1-percent sample.16 The sample size was about 

4,000 for fiscal year 2016. Once RRB completes its benefit calculation for 

each of those cases, it aggregates the result and produces an estimated 

amount for its entire population of cases17 (see fig. 2).

 14Social Security retirement benefits are based on the average of the highest 35 years of 

an individual’s earnings, indexed for wage growth. Benefits are progressive in that they 

replace a higher percentage of earnings for individuals with lower lifetime earnings 

amounts. Disability Insurance benefits are also based on average lifetime earnings.

15RRB officials said that the number of cases in the universe of RRB beneficiaries differs 

from the number of beneficiaries receiving RRB benefits. Cases are selected for the 

financial interchange on the basis of the original rail worker whose Social Security number 

ended in 30. There may be a number of beneficiaries, such as spouses and children, 

associated with each worker.

16The last two digits of a Social Security number range from 01 to 99 and are assigned 

randomly. As such, any combination of the last two digits should account for about 1 

percent of all Social Security numbers. RRB stratifies its sample on the basis of different 

factors—such as the individual’s age, whether a spouse annuity was payable, or the type 

of benefit received—to improve the accuracy of its estimate.

17This is the process RRB follows for calculating benefits for individuals who are joining 

the sample in that year. In most cases, RRB officials told us that they adjust a previously 

calculated benefit by any cost of living increase for the year. Because the calculation is 

based on a sample that is determined in the same way each year—with a Social Security 

number ending in 30—an individual will be part of the sample until he or she leaves the 

rolls or dies.
Page 9 GAO-18-323 RRB Financial Interchange

Figure 2: Process for Railroad Retirement Board Staff to Calculate the Benefits 

Portion of the Financial Interchange with the Social Security Administration (SSA)

RRB reported in its annual financial interchange determination report that 

it was credited $7.2 billion dollars in fiscal year 2016 for the estimated 

amount beneficiaries would have been paid under Social Security.18

These expenses represent those that SSA would have incurred to 

administer benefits had rail workers been covered under Social Security 

(as opposed to the actual amount RRB spent to administer its programs). 

These expenses, which SSA would have funded out of its trust funds, 

include the cost to enroll individuals in its programs and maintain its 

benefit rolls. RRB calculates the amount of administrative expenses 

based on unit-cost data provided by SSA. RRB reported that it was 

credited about $22 million in administrative costs for fiscal year 2016.

SSA credits RRB for interest that accrues on the annual financial 

interchange transfer from the period in time for which it is calculated (the 

end of the fiscal year on September 30) until the amount is transferred to 

RRB in June of each year. The interest rates are equal to those SSA 

earns on its trust funds. RRB reported that it was credited about $163

million in interest for fiscal year 2016.

This amount represents the payroll taxes rail employees and employers 

would have paid into Social Security’s trust funds had workers been 

covered under Social Security. SSA and RRB generally levy payroll taxes 

on earnings at the same rate, and RRB officials told us they use payroll 

 18For the purpose of clarity in this report, we present the sum result of the OASI and DI 

amounts calculated. OASI and DI amounts are calculated separately. 

Administrative Expenses

Interest Charges

Payroll Taxes
Page 10 GAO-18-323 RRB Financial Interchange

data from employers to determine this amount. RRB reported that it 

credited SSA $2.4 billion for fiscal year 2016.

Some RRB beneficiaries pay income taxes on the benefits they receive, 

and that tax revenue is credited to SSA’s trust funds through the financial 

interchange. To put the OASI and DI trust funds in the same place as if 

rail workers were covered under Social Security, RRB credits SSA for the 

amount of income tax railroad beneficiaries paid on Social Security 

equivalent benefits.19 RRB computes this amount using tax data from the 

Department of the Treasury, and credited about $296 million to SSA for 

fiscal year 2016.

RRB also may adjust calculations on transfers from prior years; for 

instance, if new income was reported for individuals or if benefit 

overpayments are discovered for individuals in the sample.

The process for determining the financial interchange transfer with HHS—

which helps finance Medicare benefits for rail workers—has fewer 

components than for retirement and disability benefits. Generally, RRB 

determines the Medicare payroll taxes and income taxes paid by rail 

workers and transfers this amount, less administrative expenses, to HHS 

(see fig. 3). RRB estimates how much it collects in Medicare payroll taxes 

by using payroll data provided by employers for workers whose Social 

Security numbers end in 30.20 RRB credited HHS for about $637 million 

for fiscal year 2016.

 19Individuals usually only have to pay federal income taxes on their Social Security 

benefits if they have a certain level of income, such as wages, in addition to the Social 

Security benefits they receive. The amount of Social Security benefits that is taxable 

depends on the individual’s combined income, but at most, 85 percent of the benefits may 

be taxable.

20RRB officials said that it is necessary to estimate the amount of Medicare payroll taxes 

collected from rail workers because it does not receive reports for all rail workers on the 

amounts collected. Specifically, RRB does not have data on amount of payroll taxes paid 

on wages in excess of SSA’s maximum taxable wage (which is $128,400 in 2018) except 

for active workers who are part of the 1-percent financial interchange sample. Officials told 

us that RRB only collects payroll taxes on the portion of individuals’ earnings below that 

amount, adding RBB does not collect amounts exceeding the maximum taxable wage 

(except for the 1-percent sample). It does not have data on these payroll taxes because 

this information is not needed to administer its programs.

Income Taxes

Medicare Transfers
Page 11 GAO-18-323 RRB Financial Interchange

Figure 3: Medicare Financial Interchange Calculation for HHS and RRB, Fiscal Year 2016

Overall, the procedures we observed, and which RRB explained and 

demonstrated, for calculating the financial interchange are consistent with 

the methodology agreed to by RRB, SSA, and HHS. An annual 

determination report produced by the three agencies documents this 

methodology. Additionally, several audits conducted for the RRB Office of 

Inspector General determined that the methodology is appropriate for 

achieving the purpose of the financial interchange. Specifically, the audits

concluded that the sample used in calculating benefits was representative 

of RRB’s population of beneficiaries, the formulas used to project the 

results of the sample on the entire population of beneficiaries were 

consistent with RRB’s design, and that assumptions made by RRB when 

carrying out calculations were reasonable.
Page 12 GAO-18-323 RRB Financial Interchange

SSA has made a net transfer to RRB through the financial interchange 

each year since 1958.21 The cumulative net transfer from the Social 

Security trust funds to RRB through 2015 was approximately $266 billion 

in 2016 dollars. Of this amount, transfers related to retirement and 

survivor benefits comprised about $256 billion and disability benefits 

accounted for about $10 billion.22 This trend in transfers is primarily 

caused by RRB benefit payments exceeding payroll taxes collected as 

calculated by the interchange, which has been the case each year of the 

financial interchange, resulting in a net amount owed to RRB from SSA 

each year (see fig. 4).

 21When it was introduced, the financial interchange was made retroactive to 1937. The 

first determination covered the period from 1937 through 1952 and determined that RRB 

owed Social Security’s trust funds a balance of about $488 million. Only interest was paid 

on that amount until the debt was liquidated as of 1958 by subsequent offsets from 

determinations made in favor of RRB. Since 1958, a transfer has been made from SSA to 

RRB each year, with the exception of four transfers from RRB to SSA to the Disability 

Insurance Trust Fund in 1959, 1960, 1977, and 1980.

22Transfers to the OASI and DI trust funds are made separately. There were four years in 

which a transfer was made to the DI trust fund: 1959, 1960, 1977, and 1980. In this report, 

we present the net of the OASI and DI transfers.

High Ratio of 

Beneficiaries to Rail 

Workers Has 

Resulted in Transfers 

From SSA to RRB 

Each Year Since 

1958
Page 13 GAO-18-323 RRB Financial Interchange

Figure 4: Benefits Paid, Payroll Taxes as Calculated in the Financial Interchange, and Funds Transferred from the Social 

Security Administration (SSA) to the Railroad Retirement Board (RRB), Calendar Years 1958 through 2015 (in constant 2016 

billions of dollars)

Note: The financial interchange calculation includes other elements, such as administrative costs and 

interest paid, which are not displayed in this figure.
Page 14 GAO-18-323 RRB Financial Interchange

Based on the data RRB reported, the continuing flow of funds to RRB 

from SSA has largely been driven by a steadily shrinking number of active 

workers in the rail industry paying payroll taxes in support of a larger 

population of beneficiaries. According to RRB data, the number of 

workers in the rail industry peaked at the end of World War II, when there 

were almost 1.7 million workers. Since then, this number declined steadily 

to about 231,000 in 2016. Additionally, the number of beneficiaries has 

exceeded the number of active workers since 1961. According to RRB 

data, there was about 1 beneficiary for every 10 workers in 1938; the ratio 

had increased to 3 beneficiaries for every 10 rail workers in 1951, when 

the financial interchange was created. By 2016, there were 28

beneficiaries for every 10 workers.23 Furthermore, RRB officials noted

that another factor causing increased fund transfers from SSA to RRB 

was a series of successive amendments to the Social Security Act which 

raised benefits immediately while deferring tax increases to pay for the 

increased benefits. As a result of these two factors, the payroll taxes paid 

by rail workers have not been sufficient to pay for all of the benefits paid 

by RRB. Hence, the financial interchange has consistently transferred 

money from SSA to RRB (see fig 5).

 23In comparison, there were 3.6 Social Security beneficiaries for every 10 covered 

workers in 2016; however, Social Security also paid more benefits than it collected in 

payroll taxes.
Page 15 GAO-18-323 RRB Financial Interchange

Figure 5: Rail Workers Compared to Beneficiaries Calendar Years 1937 through 2016

Note: Available Railroad Retirement Board data present the number of beneficiaries according to 

fiscal year and the average number of workers by calendar year.
Page 16 GAO-18-323 RRB Financial Interchange

According to SSA actuarial estimates, the flow of funds to RRB from SSA 

is projected to continue. Social Security’s 2017 trustees report projects 

that the amount of transfers to RRB will continue to grow though at least 

2026.24 Moreover, RRB’s most recent actuarial valuation report estimates 

that under three employment assumptions—optimistic, moderate, and 

pessimistic—the number of beneficiaries will continue to exceed the 

number of rail workers through at least 2088.25

RRB has collected payroll taxes for HHS since 1966. From 1966 through 

2016, RRB reported that it transferred a total of $30 billion in 2016 dollars 

through the financial interchange to the Hospital Insurance Trust Fund 

(see fig. 6).

 24The Board of Trustees, The 2017 Annual Report of the Board of Trustees of the Federal 

Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds

(Washington, D.C.: July 2017).

25RRB’s optimistic and moderate employment scenarios assume stable passenger rail 

employment and different rates of decline in freight employment; the pessimistic scenario 

follows the structure of the other two scenarios, except that it assumes a decline in 

passenger rail employment and steeper declines in freight employment. For more 

information on the three employment assumptions, see RRB, Twenty-Sixth Actuarial 

Valuation of the Assets and Liabilities Under the Railroad Retirement Acts as of December 

31, 2013 with Technical Supplement, (Chicago, IL: September 2015).
Page 17 GAO-18-323 RRB Financial Interchange

Figure 6: Net Financial Interchange Transfers from the Railroad Retirement Board (RRB) to the Department of Health and 

Human Services (HHS), Calendar Years 1966 through 2015, (in constant 2016 millions of dollars)

Note: No funds were transferred from RRB to HHS in 1977. In that year, RRB changed the timing of 

its financial interchange calculation. Funds for 1977 were included in the 1978 transfer.
Page 18 GAO-18-323 RRB Financial Interchange

RRB takes a number of steps to ensure that the financial interchange 

amount is accurately calculated each year. For example:

• Sample verification: To make sure that the financial interchange 

sample is up to date, RRB staff told us that they query their 

beneficiary database at the beginning and end of the annual financial 

interchange calculation to ensure that all beneficiaries who should be 

part of its sample—those with a Social Security number ending in 

30—are included. Those included in the sample can change from year 

to year, for instance, when new beneficiaries join the retirement rolls 

or when beneficiaries die.

• Supervisory review: RRB officials told us that the work of a new 

employee who calculates the financial interchange is reviewed by 

another employee until the new employee is determined to be 

proficient.

• Error checks: Electronic error checks built into the system RRB uses 

to calculate the financial interchange help prevent mistakes by 

flagging erroneous values. These checks alert employees in real time 

that an incorrect value may have been entered (for example, a benefit 

amount that exceeds what beneficiaries can receive). Officials also 

told us that they run similar checks in batches throughout the year to 

sweep for any potential errors that were not addressed by employees. 

They noted that they will work with staff to address all potential errors 

before the financial interchange calculation is finalized. However, 

RRB’s error checks do not cover all potential erroneous values.

• High-level review: RRB officials told us that the Chief of Benefit and 

Employment Analysis and his staff review the results of the 

interchange calculations and determine if the end result is reasonable 

compared to projections made earlier in the year, based on actual 

payroll and beneficiary data.

RRB Takes Measures 

to Oversee the 

Financial Interchange 

Calculation, but 

Shortcomings 

Increase the Risk of 

Errors

RRB Takes Oversight 

Steps, but Manual Data 

Entry and Systems 

Limitations May Prevent 

RRB from Detecting 

Mistakes
Page 19 GAO-18-323 RRB Financial Interchange

Despite these steps, limitations in RRB’s error checks and its reliance on 

manual data entry are potential sources of mistakes in financial 

interchange calculations. The process RRB staff follow in computing 

benefit amounts for the financial interchange involves manual data entry 

of earnings data and SSA-equivalent benefits. RRB’s error checks will 

help identify values that are impossible—such as a benefit amount that 

exceeds the maximum a beneficiary can receive—but not values that are 

incorrect but still within the range of possibility. RRB staff demonstrated 

this scenario for us and acknowledged this as a limitation in their internal 

controls.

Any data entry errors have the potential to result in larger errors in the 

financial interchange determination. The benefits portion of the financial 

interchange determination is based on a sample of all cases. Should any 

errors occur in the sample, they will be magnified when RRB inflates the 

estimate to arrive at an amount for the entire population of beneficiaries. 

Additionally, RRB’s process could result in incorrect transfers for years. 

The sample is chosen in the same way each year—individuals with Social 

Security numbers ending in 30—so the same cases will remain part of the 

sample until the individuals leave the rolls. RRB officials told us that they 

generally only have to do a full set of calculations for new cases or cases 

in which additional income is detected that affects benefit amounts. RRB 

officials estimated that about 20 percent of cases in the financial 

interchange sample each year require a full calculation. For the remainder 

of cases in the interchange sample, officials said that no annual 

recomputation is needed. Instead, the previous year’s results are 

adjusted according to any cost of living increase. If a data entry error is 

made in one of these cases, RRB may not discover it until the individual 

leaves the rolls or dies, at which point RRB staff told us they recalculate 

the individual’s benefit amount.26

Data sharing between RRB and SSA could reduce the potential for data 

entry errors, but the two agencies have not recently pursued this option. 

RRB officials told us that prior to 2008 they used computer code to 

automatically save data from SSA databases into spreadsheets, where 

the data could be used for calculating the financial interchange. However, 

SSA instructed RRB to stop using this method in 2008 because of 

 26RRB officials told us that staff will recompute an individual’s benefits when he or she 

dies. If any error is uncovered, staff will retroactively adjust past financial interchange 

results to correct the mistake. However, it could potentially take years for a mistake to be 

discovered.
Page 20 GAO-18-323 RRB Financial Interchange

security concerns about saving this information outside of SSA systems. 

RRB officials added that this constraint prevents them from developing a 

more efficient method of data collection that would improve the accuracy 

and timeliness of benefit calculations for the financial interchange. 

However, RRB officials said that they have not formally approached SSA 

in the last several years to discuss potential alternatives for gaining

greater access to data. SSA officials said that RRB should follow SSA’s 

procedures for requesting a data exchange if RRB wishes to revisit this 

topic. Federal internal control standards state that agencies should use 

quality information to achieve their objectives.27 By taking additional steps 

to obtain data from SSA electronically, RRB can better position itself to 

ensure that data entered into its systems are correct and that its 

calculations are free of errors.

RRB has limited documentation and does not have formal policies to 

guide several key aspects of the financial interchange calculation. While 

we did not identify any actual errors in its calculations, these 

shortcomings in its controls increase the risk of calculations being carried 

out inconsistently or incorrectly.

The broad steps that RRB takes to determine the amounts of the financial 

interchange are documented in an annual determination report produced 

by RRB. They include, for example, the factors used to calculate 

administrative costs, discussion of adjustments made to calculations from 

prior years, and descriptions of the formulas used to project the results of 

RRB’s benefit sample to the population of railroad beneficiaries. However, 

the agency does not have clear documentation of the detailed steps used 

by staff to calculate the interchange amounts. A 2010 audit of the 

financial interchange process conducted for the RRB Office of Inspector 

General found that documentation of the financial interchange process 

was insufficient for a knowledgeable third party to replicate without verbal 

explanation from RRB staff.28 In response, RRB officials told us that they 

produced some documentation such as charts showing the workflows for 

 27Standards for Internal Control in the Federal Government, GAO-14-704G (Washington, 

D.C.: September 2014).

28Review of the Technical Approach and Methodology Used to Determine the Annual 

Financial Interchange Amount for the Year Ended September 30, 2008, Report No. 10-07 

(Chicago, IL: May 19, 2010).

Limited Documentation 

and Formal Policies

Increase the Risk for 

Errors in Key Aspects of 

the Financial Interchange 

Process

Limited Documentation of the 

Financial Interchange Process
Page 21 GAO-18-323 RRB Financial Interchange

different portions of the process, such as for calculating benefits, payroll 

taxes, and financial projection—and instructions for staff in RRB’s Bureau 

of the Actuary for high-level review of the formulas and entries for the final 

calculation results.

However, the documentation did not provide enough detail about the 

steps staff must take when conducting financial interchange calculations 

so the process can be followed without additional explanation. For 

instance, the documentation did not discuss the process by which staff 

obtain earnings data and enter it into SSA’s benefit calculator, manually 

enter the results into RRB’s system, or the different alerts that notify staff 

of potential mistakes and how staff deal with them. Federal internal 

control standards state that effective documentation provides a means to 

retain organizational knowledge and mitigate the risk of having knowledge 

limited to a few personnel, as well as a means to communicate that 

knowledge as needed to external parities, such as auditors.29 Written 

documentation with specific steps for carrying out the financial 

interchange calculation and using its data system would help RRB ensure 

that its staff and others could carry out and replicate its process 

consistently.

RRB does not have current or complete documentation related to the 

computer system it uses to compute the financial interchange. 

Specifically, RRB officials said that they do not have current 

documentation such as a manual or data dictionary that would provide 

information on the data elements in the system, their definitions, 

descriptions, and range of potential values. They said a data dictionary is 

not necessary because data are contained in a format in which rows and 

columns are labeled according to fields and years. However, such 

labeling does not include documentation, for example, about whether 

values entered in those fields are allowable. Federal internal control 

standards state that effective documentation is needed to retain 

knowledge and prevent knowledge from being limited to a few staff. Even 

if the data system is relatively uncomplicated, without such 

documentation, it is difficult for RRB staff and others to fully understand 

all elements in the system, and it could complicate efforts to make any 

changes in the future or bring new staff up to speed on the system.

 29GAO-14-704G.

Limited Documentation of 

RRB’s Computer System
Page 22 GAO-18-323 RRB Financial Interchange

RRB does not have written procedures for how to address instances in 

which staff do not correct potential errors flagged by its computer system. 

As noted earlier, RRB’s system for calculating the financial interchange 

will alert staff to potential data entry errors. RRB officials said this system 

has the ability to allow staff to override the alert in some cases, generally 

in complex cases, such as when RRB benefits are offset by other public 

pensions. In these cases, the system does not distinguish between an 

actual error and instances in which additional work and review are 

needed because of complex benefit calculations. Staff can override the 

alert in these cases where there is no actual error, but officials noted that 

a report of potential errors that is generated by the system would still 

include these cases, which may be referred back to staff for clarification 

or correction.30 If implemented correctly, these procedures could help 

staff take appropriate action on these complex cases. However, current 

procedures are not formally documented and officials said they have not 

considered producing written procedures because they believe the 

process for addressing alerts is clear. Federal internal control standards 

indicate that effective documentation assists in management’s design of 

internal controls and can mitigate the risk that knowledge is limited to a 

few staff. RRB’s lack of written procedures can make it difficult for staff or 

reviewers to know if procedures are carried out consistently—such as 

whether staff appropriately override an error alert—and can create 

challenges if there is staff turnover. It is important to ensure that all 

potential errors are addressed correctly given that mistakes in the 

financial interchange sample can be multiplied when estimating benefit 

payments for the universe of RRB beneficiaries.

According to RRB officials, new employees will have their calculations 

reviewed until the employees are deemed to be proficient, and 

calculations by any staff member are subject to review and periodically 

reviewed for accuracy. Federal internal control standards call for 

documenting agency procedures. However, RRB does not have a 

minimum or maximum time established for which it will review the work of 

new staff, and does not have an overall policy for reviewing staff 

members’ work after they have been deemed proficient. Officials told us 

they had not considered setting a policy regarding supervisory review. 

They added that individualized, on-the-job training is more appropriate for 

new staff than a formalized process. In the case of current employees, 

 30Officials said that such cases account for fewer than 1 percent of all the cases in the 

financial interchange sample.

No Written Documentation on 

Procedures for Overriding

Potential Errors

No Formal Policy on 

Supervisory Review
Page 23 GAO-18-323 RRB Financial Interchange

any potential errors would be identified when the case is terminated, at 

which time all cases are reviewed and recomputed. Additionally, officials 

said that a formal policy would not increase the number of cases 

reviewed and potentially constrain their ability to correct new errors as 

they occur. Nonetheless, without formal policies on supervisory review, 

RRB cannot reasonably ensure that the work performed by staff is 

adequately or consistently reviewed for quality.

SSA and HHS provide some oversight of the financial interchange 

process, but do not review case-level calculations. Both agencies 

approve the results of the financial interchange calculations, but officials 

from SSA and HHS told us that their oversight is limited to high-level 

reviews of RRB’s calculations to determine whether results significantly 

vary from previous years. For instance, staff from SSA’s Office of the 

Chief Actuary told us that they examine RRB’s payments and revenues 

against SSA’s benefits paid and payroll taxes collected to determine if 

there are large or inexplicable changes from year to year, in which case 

they will ask RRB for additional information to understand the changes. 

Additionally, RRB officials told us that formulas used in their spreadsheets 

to calculate the results of the interchange have been reviewed by SSA 

actuaries.

While these actions could help identify larger errors, the agencies will not 

be able to detect whether errors are made on complex, case-level 

calculations or if SSA rules are being correctly followed. In response to 

prior errors in financial interchange calculations, RRB officials told us that 

SSA reviewed case-level calculations from the 1990s until 2002. SSA 

officials told us that they have not reviewed cases since then because of 

resource constraints. A 2009 SSA Office of the Inspector General report 

recommended that the agency consider increasing its oversight of the 

process, such as setting a schedule for review of individual cases given 

the importance of reviews in verifying transfers.31 However, SSA has not 

taken action on this recommendation. HHS officials told us that the 

financial interchange is one of a number of relatively small funding 

streams and the agency has never had cause to suspect mistakes and 

has never examined case-level calculations. Federal internal control 

standards state that agencies should establish and operate monitoring 

 31Social Security Administration Office of the Inspector General, Quick Response 

Evaluation: Processing of Railroad Worker Disability Claims, A-05-09-29119 (Baltimore, 

MD.: May 2009).

SSA and HHS Do Not 

Review the Results of 

Case-Level Calculations
Page 24 GAO-18-323 RRB Financial Interchange

activities to evaluate the results of activities.32 Without monitoring how 

calculations are made, SSA cannot reasonably ensure that the transfers it 

makes or receives with RRB are accurate. In commenting on a draft of 

this report, HHS raised questions about whether it has the authority to 

review case-level calculations, but noted in follow-up communication that 

this issue is currently undergoing legal review at HHS. As a result, HHS 

officials told us that they would not be able to provide additional 

clarification at this time. We continue to believe that HHS would be better 

positioned to ensure that transfers it makes and receives are calculated 

correctly if it reviews case-level calculations.

The financial interchange provides RRB with a significant portion of its 

funding, and trends in the number of beneficiaries and workers suggest 

this will continue to be the case in the future. RRB developed a process to 

calculate the financial interchange amount, and the accuracy of the 

calculations depends in large part on correct data being manually entered 

into RRB’s computer system. However, RRB’s current controls do not 

address some potential sources of error. Having the ability to 

electronically obtain data from SSA could help reduce the risk posed by 

data entry errors.

Further, RRB has limited written documentation for carrying out aspects 

of the financial interchange calculation, such as how its computer system 

is structured, how to address instances when staff override error alerts, 

and how staff work is reviewed. Without such documentation, RRB puts 

itself at risk of staff carrying out actions inconsistently, losing operational 

knowledge when staff leave or retire, and complicating oversight of its 

operations.

Lastly, SSA and HHS increase the risk of errors by not performing caselevel reviews of financial interchange calculations. This is especially true 

for the SSA portion of the interchange, which involves complex 

calculations performed according to SSA rules. In its role as the 

administrator of the OASI and DI programs, SSA is best positioned to 

determine if its rules are properly being applied to financial interchange 

calculations. The large sums SSA transfers through the interchange—

over $4 billion annually—warrant additional oversight to ensure that 

transfer amounts are correct.

 32GAO-14-704G.

Conclusions
Page 25 GAO-18-323 RRB Financial Interchange

We are making a total of eight recommendations, including five to RRB 

(The Board), two to the Commissioner of SSA, and one to the Secretary 

of HHS.

• The Board should work with SSA to explore options for obtaining data 

electronically and limiting the reliance of the financial interchange 

process on manual data entry. (Recommendation 1)

• The Board should produce written documentation on the financial 

interchange process such that a knowledgeable third party could carry 

out and replicate its process consistently without further explanation. 

(Recommendation 2)

• The Board should produce written documentation of its computer 

system and its structure, such as a manual for the computer system, 

and data dictionary to provide information on the data elements in the 

system, their definitions, descriptions, and range of potential values. 

(Recommendation 3)

• The Board should produce written documentation of its procedures for 

instances when staff override error alerts generated by its computer 

system. (Recommendation 4)

• The Board should produce formal policies on how the work of staff 

performing the financial interchange is reviewed. (Recommendation 5)

• The Commissioner of SSA should work with RRB to explore options 

for electronically sharing data and limiting the reliance of the financial 

interchange process on manual data entry. (Recommendation 6)

• The Commissioner of SSA should take additional steps to provide 

oversight of financial interchange calculations at the individual-case 

level. This could include periodically reviewing a subset of these 

cases. (Recommendation 7)

• The Secretary of HHS should, consistent with its existing statutory 

authority, take additional steps to provide oversight of financial 

interchange calculations at the individual-case level. If the Secretary 

concludes that there are limitations in its authority in this area, the 

Secretary should seek to obtain the necessary additional authority. 

(Recommendation 8)

We provided a draft of this report to RRB, SSA, and HHS for review and 

comment. In written comments, both RRB and SSA agreed with the 

recommendations. RRB noted that it will devote the resources needed to 

improve the written documentation of its procedures and computer 

Recommendations for 

Executive Action

Agency Comments 

and Our Evaluation
Page 26 GAO-18-323 RRB Financial Interchange

system. RRB and SSA also provided technical comments which we 

incorporated as appropriate. Copies of their written comments are 

reproduced in appendixes I and II.

In written comments, which are reproduced in appendix III, HHS 

disagreed with the recommendation that it take additional steps to provide 

oversight of financial interchange calculations at the individual-case level. 

HHS noted that while in theory it may be a good idea to incorporate such 

review into the process, it is limited by statute in its ability to oversee how 

RRB calculates transfers between HHS and RRB. HHS went on to 

describe a section of the Social Security Act that they noted “pertains 

more to Supplemental Medical Insurance trust fund draws for 

administrative costs.” Notably, with respect to HHS, our report does not 

involve that trust fund, but rather addresses the Hospital Insurance Trust 

Fund. Although HHS’s comments did not clarify why it believes that this 

section of law would limit its authority with respect to the Hospital 

Insurance Trust Fund, it nevertheless asserted that it does apply in this 

scenario. We reached out to HHS to seek clarification of its comments. 

For example, we inquired about the applicability of a separate provision of 

law that would appear to establish a role for HHS to work with RRB to 

determine financial interchange amounts.33 Ultimately, HHS did not 

provide the clarification we sought, instead indicating via email that this 

recommendation is currently undergoing legal review and that HHS is 

unable to provide a response to our questions at this time. HHS further 

stated that it will continue to work on this issue to provide GAO with 

updates in the future. In light of the uncertainty surrounding HHS’s 

authority in this area and the fact that HHS declined to respond to our 

requests for clarification of its legal authority, we have modified our 

recommendation to reflect the fact that HHS may need to seek additional 

statutory authority to implement our recommendation, should HHS 

determine it to be necessary.

As agreed with your offices, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies of this report to the 

appropriate congressional committees, the Railroad Retirement Board, 

the Commissioner of the Social Security Administration, and the 

Secretary of the Department of Health and Human Services. In addition, 

 33See 45 U.S.C. § 231f(c)(2).
Page 27 GAO-18-323 RRB Financial Interchange

the report will be available at no charge on the GAO website at 

http://www.gao.gov.

If you or your staff have any questions, please contact me at (202) 512-

7215 or curdae@gao.gov. Contact points for our Offices of Congressional 

Relations and Public Affairs may be found on the last page of this report. 

GAO staff who made significant contributions to this report are listed in 

Appendix IV.

Elizabeth H. Curda

Director

Education, Workforce, and Income Security
Appendix I: Comments from the Railroad 

Retirement Board

Page 28 GAO-18-323 RRB Financial Interchange

Appendix I: Comments from the Railroad 

Retirement Board
Appendix I: Comments from the Railroad 

Retirement Board

Page 29 GAO-18-323 RRB Financial Interchange
Appendix II: Comments from the Social 

Security Administration

Page 30 GAO-18-323 RRB Financial Interchange

Appendix II: Comments from the Social 

Security Administration
Appendix II: Comments from the Social 

Security Administration

Page 31 GAO-18-323 RRB Financial Interchange
Appendix III: Comments from the Department 

of Health and Human Services

Page 32 GAO-18-323 RRB Financial Interchange

Appendix III: Comments from the 

Department of Health and Human Services
Appendix III: Comments from the Department 

of Health and Human Services

Page 33 GAO-18-323 RRB Financial Interchange
Appendix IV: GAO Contact and Staff 

Acknowledgments

Page 34 GAO-18-323 RRB Financial Interchange

Elizabeth Curda, (202) 512-7215, or curdae@gao.gov

In addition to the contact named above, Mark Glickman (Assistant 

Director), Daniel R. Concepcion (Analyst-in-Charge), and Randy DeLeon 

made key contributions to this report. Additional contributors include 

David Ballard, Carl Barden, William Boutboul, James Cosgrove, 

Alexander Galuten, Jennifer Gregory, Sheila McCoy, Jean McSween, 

Mimi Nguyen, Joseph Silvestri, Almeta Spencer, and Kate van Gelder.

Appendix IV: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(101512)
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