I

107TH CONGRESS

1ST SESSION H. R. 1140

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

enhanced benefits to employees and beneficiaries.

IN THE HOUSE OF REPRESENTATIVES

MARCH 21, 2001

Mr. YOUNG of Alaska (for himself, Mr. OBERSTAR, Mr. QUINN, and Mr.

CLEMENT) introduced the following bill; which was referred to the Committee on Transportation and Infrastructure, and in addition to the Committee on Ways and Means, for a period to be subsequently determined

by the Speaker, in each case for consideration of such provisions as fall

within the jurisdiction of the committee concerned

A BILL

To modernize the financing of the railroad retirement system

and to provide enhanced benefits to employees and beneficiaries.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

5 ‘‘Railroad Retirement and Survivors’ Improvement Act of

6 2001’’.

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

8 this Act is as follows:
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Sec. 1. Short title; table of contents.

TITLE I—AMENDMENTS TO RAILROAD RETIREMENT ACT OF 1974

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

Sec. 102. Retirement age restoration.

Sec. 103. Vesting requirement.

Sec. 104. Repeal of railroad retirement maximum.

Sec. 105. Investment of railroad retirement assets.

Sec. 106. Elimination of supplemental annuity account.

Sec. 107. Transfer authority revisions.

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

TITLE II—AMENDMENTS TO THE INTERNAL REVENUE CODE OF

1986

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

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

Sec. 203. Repeal of supplemental annuity tax.

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

1 TITLE I—AMENDMENTS TO RAIL2 ROAD RETIREMENT ACT OF

3 1974

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

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

8 the following new subdivision:

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

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

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

13 the unreduced annuity shall be increased to that initial

14 minimum amount. For the purposes of this subdivision,

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

2 reduction for entitlement to an annuity under section

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

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

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

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

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

11 unreduced annuity computed at the time an annuity is

12 awarded to that widow or widower, except that—

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

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

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

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

17 it appears.

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

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

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

22 new initial minimum amount shall be computed at the

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

24 section 2(d)(1)(i) of this Act.’’.

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

2 this section shall take effect January 1, 2001 and

3 shall apply to annuity amounts accruing for months

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

6 awarded before that date if the annuity amount

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

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

9 Public Law 97–35.

10 (2) SPECIAL RULE FOR ANNUITIES AWARDED

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

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

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

16 widow’s or widower’s annuity.

17 SEC. 102. RETIREMENT AGE RESTORATION.

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

19 Railroad Retirement Act of 1974 is amended by inserting

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

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

2 Act).’’.

3 (b) SPOUSE AND SURVIVOR ANNUITIES.—Section

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

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

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

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

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

10 repealed.

11 (d) EFFECTIVE DATES.—

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

14 shall apply to annuities that begin to accrue on or

15 after January 1, 2001.

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

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

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

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

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

24 section.
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1 SEC. 103. VESTING REQUIREMENT.

2 (a) CERTAIN ANNUITIES FOR INDIVIDUALS.—Section

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

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

6 service, all of which accrues after December 31,

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

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

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

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

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

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

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

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

16 an individual may also be entitled to an annuity amount

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

18 shall be reduced for early retirement in the same manner

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

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

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

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

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

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

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

7 provided such individual under this subsection, shall be

8 computed as though the annuity under this Act began to

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

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

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

12 the individual first met the conditions for entitlement to

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

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

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

17 Railroad Retirement Act of 1974 is amended by inserting

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

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

21 of the Railroad Retirement Act of 1974 is amended by

22 adding at the end the following:

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

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

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

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

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

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

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

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

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

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

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

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

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

18 record of an employee who will have completed less than

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

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

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

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

24 provided under this subsection shall be computed as

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

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

5 annuity under this Act other than the conditions set forth

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

8 (f) APPLICATION DEEMING PROVISION.—Section

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

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

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

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

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

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

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

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

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

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

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

3 of 1974 is amended—

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

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

7 and

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

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

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

13 is amended—

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

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

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

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

20 (i) CONFORMING AMENDMENTS.—

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

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

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

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

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

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

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

8 after ‘‘ten years of service’’.

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

10 this section shall take effect January 1, 2001.

11 SEC. 104. REPEAL OF RAILROAD RETIREMENT MAXIMUM.

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

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

16 of the Railroad Retirement Act of 1974 is amended by

17 striking subsection (c).

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

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

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

22 SEC. 105. INVESTMENT OF RAILROAD RETIREMENT ASSETS.

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

2 (i) the following:

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

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

8 of the Railroad Retirement Trust Fund (hereinafter

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

10 hereby established as a trust organized in the Dis11 trict of Columbia and shall, to the extent not incon12 sistent with this Act, be subject to the laws of the

13 District of Columbia applicable to such trusts.

14 ‘‘(2) NOT A FEDERAL AGENCY OR INSTRUMEN15 TALITY.—The Trust is not a department, agency, or

16 instrumentality of the Government of the United

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

18 States Code.

19 ‘‘(3) BOARD OF TRUSTEES.—

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

21 Board of Trustees, consisting of seven mem22 bers, each appointed by a unanimous vote of

23 the Railroad Retirement Board. The Railroad

24 Retirement Board may remove any member so

25 appointed by unanimous vote. Of the seven
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1 members, three shall represent the interests of

2 labor, three shall represent the interests of

3 management, and one shall represent the inter4 ests of the general public. The members of the

5 Board of Trustees shall not be considered offi6 cers or employees of the Government of the

7 United States.

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

9 Board of Trustees shall be appointed only from

10 among persons who have experience and exper11 tise in the management of financial investments

12 and pension plans. No member of the Railroad

13 Retirement Board shall be eligible to be a mem14 ber of the Board of Trustees.

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

16 subparagraph, each member shall be appointed

17 for a 3-year term. The initial members ap18 pointed under this paragraph shall be divided

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

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

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

22 year term. A vacancy in the Board of Trustees

23 shall not affect the powers of the Board of

24 Trustees and shall be filled in the same manner

25 as the selection of the member whose departure
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1 caused the vacancy. Upon the expiration of a

2 term of a member of the Board of Trustees,

3 that member shall continue to serve until a suc4 cessor is appointed.

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

6 The Board of Trustees shall—

7 ‘‘(A) retain independent advisers to assist

8 it in the formulation and adoption of its invest9 ment guidelines;

10 ‘‘(B) retain independent investment man11 agers to invest the assets of the Fund in a

12 manner consistent with such investment guide13 lines;

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

15 to the policies adopted in subparagraph (A);

16 ‘‘(D) pay administrative expenses of the

17 Fund and the Trust from the money in the

18 Fund; and

19 ‘‘(E) transfer money to the disbursing

20 agent to pay benefits payable under this Act

21 from money in the Fund and administrative ex22 penses related to those benefits.

23 ‘‘(5) REPORTING REQUIREMENTS AND FIDU24 CIARY STANDARDS.—The following reporting re25 quirements and fiduciary standards shall apply with
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1 respect to the Railroad Retirement Trust and the

2 Railroad Retirement Trust Fund (and the assets

3 held in such Trust Fund):

4 ‘‘(A) DUTIES OF THE BOARD OF TRUST5 EES.—The Railroad Retirement Trust and each

6 member of the Board of Trustees shall dis7 charge their duties with respect to the assets of

8 the Fund solely in the interest of the Railroad

9 Retirement Board and through it, the partici10 pants and beneficiaries of the programs funded

11 under this Act—

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

13 ‘‘(I) providing benefits to partici14 pants and their beneficiaries; and

15 ‘‘(II) defraying reasonable ex16 penses of administering the functions

17 of the Trust;

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

19 and diligence under the circumstances then

20 prevailing that a prudent person acting in

21 a like capacity and familiar with such mat22 ters would use in the conduct of an enter23 prise of a like character and with like

24 aims;
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1 ‘‘(iii) by diversifying investments so as

2 to minimize the risk of large losses, unless

3 under the circumstances it is clearly pru4 dent not to do so; and

5 ‘‘(iv) in accordance with Trust gov6 erning documents and instruments insofar

7 as such documents and instruments are

8 consistent with this Act.

9 ‘‘(B) PROHIBITIONS WITH RESPECT TO

10 MEMBERS OF THE BOARD OF TRUSTEES.—No

11 member of the Board of Trustees shall—

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

13 in the trustee’s own interest or for the

14 trustee’s own account;

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

16 capacity act in any transaction involving

17 the assets of the Fund on behalf of a party

18 (or represent a party) whose interests are

19 adverse to the interests of the Trust, the

20 Fund, the Railroad Retirement Board, or

21 the interests of participants or bene22 ficiaries; or

23 ‘‘(iii) receive any consideration for the

24 trustee’s own personal account from any

25 party dealing with the assets of the Fund.
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1 ‘‘(C) EXCULPATORY PROVISIONS AND IN2 SURANCE.—Any provision in an agreement or

3 instrument that purports to relieve a trustee

4 from responsibility or liability for any responsi5 bility, obligation or duty under this Act shall be

6 void: Provided, however, That nothing shall

7 preclude—

8 ‘‘(i) the Trust from purchasing insur9 ance for its trustees or for itself to cover

10 liability or losses occurring by reason of

11 the act or omission of a trustee, if such in12 surance permits recourse by the insurer

13 against the trustee in the case of a breach

14 of a fiduciary obligation by such trustee;

15 ‘‘(ii) a trustee from purchasing insur16 ance to cover liability under this section

17 from and for his own account; or

18 ‘‘(iii) an employer or an employee or19 ganization from purchasing insurance to

20 cover potential liability of one or more

21 trustees with respect to their fiduciary re22 sponsibilities, obligations, and duties under

23 this section.

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

25 person who handles funds or other property of
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1 the Fund (hereafter in this subsection referred

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

3 bond shall provide protection to the Fund

4 against loss by reason of acts of fraud or dis5 honesty on the part of any Trust official, di6 rectly or through the connivance of others, and

7 shall be in accordance with the following:

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

9 fixed at the beginning of each fiscal year

10 of the Trust by the Railroad Retirement

11 Board. Such amount shall not be less than

12 10 percent of the amount of the funds

13 handled. In no case shall such bond be less

14 than $1,000 nor more than $500,000, ex15 cept that the Railroad Retirement Board,

16 after consideration of the record, may pre17 scribe an amount in excess of $500,000,

18 subject to the 10 per centum limitation of

19 the preceding sentence.

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

21 Trust official to receive, handle, disburse,

22 or otherwise exercise custody or control of

23 any of the funds or other property of the

24 Fund without being bonded as required by

25 this subsection and it shall be unlawful for
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1 any Trust official, or any other person hav2 ing authority to direct the performance of

3 such functions, to permit such functions,

4 or any of them, to be performed by any

5 Trust official, with respect to whom the re6 quirements this subsection have not been

7 met.

8 ‘‘(iii) It shall be unlawful for any per9 son to procure any bond required by this

10 subsection from any surety or other com11 pany or through any agent or broker in

12 whose business operations such person has

13 any control or significant financial interest,

14 direct or indirect.

15 ‘‘(E) AUDIT AND REPORT.—

16 ‘‘(i) The Trust shall annually engage

17 an independent qualified public accountant

18 to audit the financial statements of the

19 Fund.

20 ‘‘(ii) The Trust shall submit an an21 nual management report to the Congress

22 not later than 180 days after the end of

23 the Trust’s fiscal year. A management re24 port under this subsection shall include—
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1 ‘‘(I) a statement of financial po2 sition;

3 ‘‘(II) a statement of operations;

4 ‘‘(III) a statement of cash flows;

5 ‘‘(IV) a statement on internal ac6 counting and administrative control

7 systems;

8 ‘‘(V) the report resulting from an

9 audit of the financial statements of

10 the Trust conducted under subpara11 graph (E)(i); and

12 ‘‘(VI) any other comments and

13 information necessary to inform the

14 Congress about the operations and fi15 nancial condition of the Trust and the

16 Fund.

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 manage21 ment report when it is submitted to Con22 gress.

23 ‘‘(F) ENFORCEMENT.—The Railroad Re24 tirement Board may bring a civil action—
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1 ‘‘(i) to enjoin any act or practice by

2 the Railroad Retirement Investment Trust,

3 its Board of Trustees or its employees or

4 agents that violates any provision of this

5 Act; or

6 ‘‘(ii) to obtain other appropriate relief

7 to redress such violations, or to enforce

8 any provisions of this Act.

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

10 The Board of Trustees shall have the authority to

11 make rules to govern its operations, employ profes12 sional staff, and contract with outside advisers to

13 provide legal, accounting, investment advisory or

14 other services necessary for the proper administra15 tion of this subsection. In the case of contracts with

16 investment advisory services, compensation for such

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

18 such other terms and conditions as are customary

19 for such services.

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

21 Trustees constitute a quorum to do business. Invest22 ment guidelines must be adopted by a unanimous

23 vote of the entire Board of Trustees. All other deci24 sions of the Board of Trustees shall be decided by

25 a majority vote of the quorum present. All decisions
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1 of the Board of Trustees shall be entered upon the

2 records of the Board of Trustees.’’.

3 (b) CONFORMING AND TECHNICAL AMENDMENTS

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

5 Railroad Retirement Act of 1974 is amended—

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

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

8 that follows through ‘‘may be made only’’ in the sec9 ond sentence and inserting ‘‘and the Dual Benefits

10 Payments Account as are not transferred to the

11 Railroad Retirement Investment Trust as the Board

12 may determine’’;

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

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

15 and

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

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

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

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

20 of this section.

21 SEC. 106. ELIMINATION OF SUPPLEMENTAL ANNUITY AC22 COUNT.

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

24 Railroad Retirement Act of 1974 is amended by striking

25 ‘‘payments of supplemental annuities under section 2(b)
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1 of this Act shall be made from the Railroad Retirement

2 Supplemental Account, and’’.

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

4 the Railroad Retirement Act of 1974 is repealed.

5 (c) IN GENERAL.—Section 15(a) of the Railroad Re6 tirement Act of 1974 is amended by striking ‘‘, except

7 those portions of the amounts covered into the Treasury

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

9 end of the subsection and inserting a period.

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

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

12 the Railroad Retirement Supplemental Account shall con13 tinue to exist until the transfer authorized by the following

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

15 2000, the Board shall determine the balance in the Rail16 road Retirement Supplemental Account and shall direct

17 the Secretary of the Treasury to transfer such amount to

18 the Railroad Retirement Trust Fund and the Secretary

19 shall make such transfer.

20 SEC. 107. TRANSFER AUTHORITY REVISIONS.

21 (a) RAILROAD RETIREMENT ACCOUNT.—Section 15

22 of the Railroad Retirement Act of 1974 is amended by

23 adding after subsection (j) the following:

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

25 upon establishment of the Railroad Retirement Trust
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1 Fund and from time to time thereafter, direct the Sec2 retary of the Treasury to transfer, in such manner as will

3 maximize the investment returns to the Railroad Retire4 ment system, that portion of the Railroad Retirement Ac5 count that is not needed to pay current administrative ex6 penses of the Board to the Railroad Retirement Trust

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

8 (b) RAILROAD RETIREMENT TRUST FUND.—Section

9 15 of the Railroad Retirement Act of 1974, as amended

10 by subsection (a), is further amended by adding after sub11 section (k) the following:

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

13 Railroad Retirement Trust shall from time to time trans14 fer to the disbursing agent described in section 7(b)(4)

15 such amounts as may be necessary to pay benefits under

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

17 Equivalent Benefit Account or the Dual Benefit Payments

18 Account).’’.

19 (c) SOCIAL SECURITY EQUIVALENT BENEFIT AC20 COUNT.—(1) Section 15A(d)(2) of the Railroad Retire21 ment Act of 1974 is amended to read as follows:

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

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

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

25 such manner as will maximize the investment returns to
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1 the Railroad Retirement system, the balance of the Social

2 Security Equivalent Benefit Account not needed to pay

3 current benefits required to be paid from that Account to

4 the Railroad Retirement Trust Fund, and the Secretary

5 shall make that transfer. Any balance transferred under

6 this paragraph shall be used by the Railroad Retirement

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

8 obligations of the United States that are backed by the

9 full faith and credit of the United States pursuant to

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

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

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

13 Act.’’.

14 (2) TRANSFERS TO DISBURSING AGENT.—Section

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

16 amended by adding at the end the following: ‘‘The Sec17 retary shall from time to time transfer to the disbursing

18 agent under section 7(b)(4) amounts necessary to pay

19 those benefits.’’.

20 (3) CONFORMING AMENDMENT.—Section 15A(d)(1)

21 of the Railroad Retirement Act of 1974 is amended by

22 striking the second and third sentences.

23 (d) DUAL BENEFITS PAYMENTS ACCOUNT.—Section

24 15(d)(1) of the Railroad Retirement Act of 1974 is

25 amended by adding at the end the following: ‘‘The Sec-
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1 retary of the Treasury shall from time to time transfer

2 from the Dual Benefits Payments Account to the dis3 bursing agent under section 7(b)(4) amounts necessary to

4 pay benefits payable from that Account.’’.

5 (e) CERTIFICATION BY THE BOARD AND PAY6 MENT.—Paragraph (4) of section 7(b) of the Railroad Re7 tirement Act of 1974 is amended to read as follows:

8 ‘‘(4)(A) The Railroad Retirement Board, after con9 sultation with the Board of Trustees of the Railroad Re10 tirement Trust and the Secretary of the Treasury, shall

11 enter into an arrangement with a nongovernmental finan12 cial institution to serve as disbursing agent for benefits

13 payable under this Act who shall disburse consolidated

14 benefits under this Act to each recipient.

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

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

17 amounts required to be transferred from the Social

18 Security Equivalent Benefit Account and the Dual

19 Benefits Payments Account to the disbursing agent

20 to make payments of benefits and the Secretary of

21 the Treasury shall transfer those amounts;

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

23 Retirement Investment Trust the amounts required

24 to be transferred from the Railroad Retirement In25 vestment Trust to the disbursing agent to make pay-
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1 ments of benefits and the Board of Trustees shall

2 transfer those amounts; and

3 ‘‘(iii) to the disbursing agent the name and ad4 dress of each individual entitled to receive a pay5 ment, the amount of such payment, and the time at

6 which the payment should be made.’’.

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

8 Railroad Retirement Act of 1974 is amended—

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

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

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

12 from the Railroad Retirement Trust Fund or the So13 cial Security Equivalent Benefit Account, as the case

14 may be’’; and

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

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

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

18 (g) TRANSITIONAL RULE FOR EXISTING OBLIGA19 TION.—In making transfers under subsections (a) and (c),

20 the Board shall consult with the Secretary of the Treasury

21 to design an appropriate method to transfer obligations

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

23 obligations to cash prior to transfer. The Railroad Retire24 ment Trust may hold to maturity any obligations so re-
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1 ceived or may redeem them prior to maturity, as the Trust

2 deems appropriate.

3 SEC. 108. ANNUAL RATIO PROJECTIONS AND CERTIFI4 CATIONS BY THE RAILROAD RETIREMENT

5 BOARD.

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

7 Retirement Act of 1974 is amended—

8 (1) by adding the following sentence after the

9 first sentence: ‘‘On or before May 1 of each year be10 ginning in 2002, the Railroad Retirement Board

11 shall compute its projection of the account benefits

12 ratio and the average account benefits ratio (as de13 fined by section 3241(c) of the Internal Revenue

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

15 fiscal years.’’; and

16 (2) by striking ‘‘the projection prepared pursu17 ant to the preceding sentence’’ and inserting ‘‘the

18 projections prepared pursuant to the preceding two

19 sentences’’.

20 (b) CERTIFICATIONS.—The Railroad Retirement Act

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

22 ‘‘COMPUTATION AND CERTIFICATION OF ACCOUNT

23 BENEFIT RATIOS

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

25 Railroad Retirement Board shall—
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1 ‘‘(1) compute the account benefits ratios for

2 each of the most recent 10 preceding fiscal years,

3 and

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

5 such fiscal year to the Secretary.

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

7 2002, 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.

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

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

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

15 1986.’’.

16 TITLE II—AMENDMENTS TO THE

17 INTERNAL REVENUE CODE

18 OF 1986

19 SEC. 201. AMENDMENTS TO THE INTERNAL REVENUE CODE

20 OF 1986.

21 Except as otherwise provided, whenever in this title

22 an amendment or repeal is expressed in terms of an

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

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

25 or other 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

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

7 Retirement 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

11 (b).

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

13 is amended by striking subsections (c) and (d).

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

15 this section shall apply to calendar years beginning after

16 December 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)

20 of 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 compensa-
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1 tion paid during any calendar year by such employer

2 for 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 percent12 age determined under section 3241 for such cal13 endar 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 rep20 resentative a tax equal to the applicable percentage of the

21 compensation received during any calendar year by such

22 employee representative for services rendered by such em23 ployee representative. For purposes of the preceding sen24 tence, the term ‘applicable percentage’ means the percent25 age equal to the sum of the rates of tax in effect under
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1 subsections (a) and (b) of section 3101 and subsections

2 (a) and (b) of section 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 com14 pensation received during 2001,

15 ‘‘(B) 14.20 percent in the case of com16 pensation 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)

23 of section 3201 is amended to read as follows:

24 ‘‘(b) TIER 2 TAX.—
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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

4 the compensation received during any calendar year

5 by such employee for services rendered by such em6 ployee.

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

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

9 means—

10 ‘‘(A) 4.90 percent in the case of compensa11 tion received during 2001 or 2002, and

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

13 during any calendar year after 2002, the per14 centage determined under section 3241 for such

15 calendar year.’’.

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

17 amended by adding at the end thereof the following new

18 subchapter:

19 ‘‘Subchapter E—Tier 2 Tax Rate

20 Determination

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

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

22 ON AVERAGE ACCOUNT BENEFITS RATIO.

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

24 3201(b), 3211(b), and 3221(b), the applicable percentage
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1 for any calendar year is the percentage determined in ac2 cordance with the table in subsection (b).

3 ‘‘(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

4 ‘‘(c) DEFINITIONS RELATED TO DETERMINATION OF

5 RATES OF TAX.—

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

7 For purposes of this section, the term ‘average ac8 count benefits ratio’ means, with respect to any cal9 endar year, the average determined by the Secretary

10 of the account benefits ratios for the 10 most recent

11 fiscal years ending before such calendar year. If the

12 amount determined under the preceding sentence is

13 not a multiple of 0.1, such amount shall be in14 creased to the next highest multiple of 0.1.

15 ‘‘(2) ACCOUNT BENEFITS RATIO.—For pur16 poses of this section, the term ‘account benefits

17 ratio’ means, with respect to any fiscal year, the
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1 amount determined by the Railroad Retirement

2 Board by dividing the fair market value of the assets

3 in the Railroad Retirement Account and of the Rail4 road Retirement Investment Trust (and for years

5 before 2001, the Social Security Equivalent Benefits

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

7 total benefits and administrative expenses paid from

8 the Railroad Retirement Account and the Railroad

9 Retirement Investment Trust during such fiscal

10 year.

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

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

13 Federal Register of the rates of tax determined under this

14 section which are applicable for the following calendar

15 year.’’.

16 (e) CONFORMING AMENDMENTS.—

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

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

19 3211(a)’’.

20 (2) Section 72(r)(2)(B)(i) is amended by strik21 ing ‘‘section 3211(a)(2)’’ and inserting ‘‘section

22 3211(b)’’.

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

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

25 and inserting ‘‘3211(a)’’.
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1 (4) Section 3231(e)(2)(B)(ii)(I) is amended by

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

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

4 amended by adding at the end the following new

5 item:

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

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

7 this section shall apply to calendar years beginning after

8 December 31, 2000.

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