IB

Union Calendar No. 77

107TH CONGRESS

1ST SESSION H. R. 1140

[Report No. 107–82, Part I]

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

MAY 24, 2001

Reported from the Committee on Transportation and Infrastructure with an

amendment

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

MAY 24, 2001

Referral to the Committee on Ways and Means extended for a period ending

not later than July 12, 2001

JULY 12, 2001

Additional sponsors: Mr. WELLER, Mr. VISCLOSKY, Mr. BACHUS, Ms.

HOOLEY of Oregon, Mr. WHITFIELD, Mr. SKELTON, Mr. LATOURETTE,

Mr. CONYERS, Ms. HART, Mr. ISRAEL, Mr. GREEN of Wisconsin, Ms.

BROWN of Florida, Mr. NETHERCUTT, Ms. MCCOLLUM, Mr. TERRY, Mr.

RAHALL, Mr. BLUNT, Mr. CUMMINGS, Mr. BEREUTER, Mr. DEFAZIO,

Mr. WALDEN of Oregon, Mrs. TAUSCHER, Mr. FLETCHER, Ms. EDDIE

BERNICE JOHNSON of Texas, Mr. GILLMOR, Mr. LIPINSKI, Mr. COLLINS,

Mr. BERRY, Mr. PLATTS, Mr. MURTHA, Mr. PETERSON of Pennsylvania,

Mr. BLAGOJEVICH, Mr. FERGUSON, Mr. JACKSON of Illinois, Mr.

ISTOOK, Mr. DOYLE, Mr. BAKER, Mr. HOLDEN, Mr. EHLERS, Mr. BORSKI, Mr. SIMPSON, Mr. COSTELLO, Mr. COOKSEY, Mr. BALDACCI, Mr.
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POMBO, Mr. BARCIA, Mr. TOM DAVIS of Virginia, Mr. ANDREWS, Mr.

MORAN of Kansas, Ms. ROYBAL-ALLARD, Mr. SMITH of New Jersey, Ms.

VELA ́ZQUEZ, Mr. SWEENEY, Mr. RANGEL, Mr. SIMMONS, Mr. MATSUI,

Mr. JOHNSON of Illinois, Ms. KAPTUR, Mr. PETRI, Mr. KANJORSKI, Mr.

FOLEY, Ms. KILPATRICK, Mr. ISAKSON, Mr. LUTHER, Ms. PRYCE of

Ohio, Mr. MENENDEZ, Mr. SHIMKUS, Mr. LARSEN of Washington, Mr.

DUNCAN, Mr. MASCARA, Mr. MCNULTY, Mr. EHRLICH, Mr. NADLER,

Mr. HAYES, Ms. DELAURO, Mr. KING, Mr. BONIOR, Mr. GILCHREST,

Mr. UDALL of New Mexico, Mr. DOOLITTLE, Mr. PAYNE, Mr. WATKINS,

Ms. BERKLEY, Mr. TAUZIN, Mr. KLECZKA, Mr. TIAHRT, Mr. RUSH, Mr.

BOEHNER, Mr. UDALL of Colorado, Mrs. ROUKEMA, Mr. BLUMENAUER,

Mr. LATHAM, Mr. HOYER, Mr. BARTLETT of Maryland, Mr. PETERSON

of Minnesota, Mr. SAXTON, Mr. HOEFFEL, Mr. HORN, Mr. TURNER,

Mrs. KELLY, Mr. MATHESON, Mr. BOEHLERT, Mr. CARSON of Oklahoma, Mr. WATTS of Oklahoma, Mr. FROST, Mrs. EMERSON, Mr.

SANDLIN, Mr. LAHOOD, Mr. MEEKS of New York, Mr. LEACH, Mr.

WYNN, Mr. GRUCCI, Mrs. CLAYTON, Mr. UPTON, Mr. DELAHUNT, Mr.

LOBIONDO, Mr. SHOWS, Mr. MICA, Mrs. JONES of Ohio, Mrs. CAPITO,

Mr. TIERNEY, Mr. CRENSHAW, Mr. CARDIN, Mr. GILMAN, Ms. MCKINNEY, Mr. HUTCHINSON, Mr. PASTOR, Mr. GOODE, Mr. SANDERS, Mrs.

JO ANN DAVIS of Virginia, Mr. GEPHARDT, Mr. OTTER, Ms. DEGETTE,

Mr. GOODLATTE, Mr. BOSWELL, Mr. BURR of North Carolina, Ms. NORTON, Mrs. MYRICK, Mr. SNYDER, Mr. ENGLISH, Mrs. MEEK of Florida,

Mr. GANSKE, Mr. DINGELL, Mr. THUNE, Mrs. MCCARTHY of New York,

Mr. HASTINGS of Washington, Mr. TRAFICANT, Mr. WALSH, Mr. MOLLOHAN, Mr. NEY, Mr. REYES, Mr. KILDEE, Mr. WELDON of Pennsylvania, Mr. MCGOVERN, Mr. BONILLA, Mrs. NAPOLITANO, Mr. MCHUGH,

Mrs. THURMAN, Mr. OSBORNE, Mr. CLAY, Mr. KERNS, Mr. ETHERIDGE,

Mrs. MORELLA, Mr. PALLONE, Mr. LEWIS of Kentucky, Mr. BOUCHER,

Mr. WICKER, Mr. LUCAS of Oklahoma, Mr. WOLF, Mr. HINCHEY, Mr.

SESSIONS, Mr. INSLEE, Mr. CHAMBLISS, Mr. ROSS, Mr. SHERWOOD,

Mrs. MALONEY of New York, Mr. NORWOOD, Mr. WU, Ms. DUNN, Mr.

OWENS, Mr. CAMP, Mr. KIND, Mr. HYDE, Mr. MOORE, Mr. JONES of

North Carolina, Mr. BENTSEN, Mr. JENKINS, Mr. DICKS, Mr. GUTKNECHT, Mr. ABERCROMBIE, Mr. CALLAHAN, Mr. MORAN of Virginia,

Mr. SKEEN, Ms. SCHAKOWSKY, Mr. CASTLE, Mr. LAFALCE, Mr. BASS,

Mr. SCOTT, Mr. LINDER, Ms. JACKSON-LEE of Texas, Mr. GRAHAM, Mr.

PHELPS, Mrs. CUBIN, Mr. TOWNS, Mr. ROGERS of Kentucky, Mr. LEWIS

of Georgia, Mr. AKIN, Mr. SABO, Mr. GEKAS, Mr. EDWARDS, Mr.

OXLEY, Ms. BALDWIN, Mr. KELLER, Mr. GONZALEZ, Mr. HULSHOF, Mr.

JEFFERSON, Mr. GIBBONS, Mr. BAIRD, Mr. ROEMER, Mr. THOMPSON of

Mississippi, Mr. GUTIERREZ, Mr. FILNER, Mr. HASTINGS of Florida, Mr.

GREEN of Texas, Mr. CONDIT, Mr. LAMPSON, Mr. JOHN, Mr. LANTOS,

Mr. BROWN of Ohio, Mr. HOLT, Mr. MOAKLEY, Mr. BRADY of Pennsylvania, Mr. RODRIGUEZ, Mr. DAVIS of Florida, Mr. STARK, Mr. LUCAS

of Kentucky, Mr. WATT of North Carolina, Mr. EVANS, Ms. LEE, Mrs.

MINK of Hawaii, Mr. BISHOP, Mr. COYNE, Mr. SPRATT, Mr. THOMPSON

of California, Mr. GEORGE MILLER of California, Mr. STRICKLAND, Mr.

STUPAK, Mr. KENNEDY of Rhode Island, Ms. CARSON of Indiana, Mr.

BACA, Mr. HILLIARD, Mr. OLVER, Mr. HILL, Mr. MCDERMOTT, Mr.

FRANK, Mr. BERMAN, Ms. SLAUGHTER, Mr. CLYBURN, Mr. LANGEVIN,
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Mr. KUCINICH, Mr. BECERRA, Mr. MARKEY, Mr. CROWLEY, Mr.

WEINER, Mr. SAWYER, Mr. DEUTSCH, Mr. PRICE of North Carolina, Mr.

CAPUANO, Mr. FORD, Mr. MCINTYRE, Mr. ROTHMAN, Mr. ENGEL, Mr.

PASCRELL, Mr. ORTIZ, Mr. COMBEST, Mr. BARTON of Texas, Mr. KENNEDY of Minnesota, Mr. GALLEGLY, Mr. REHBERG, Mrs. BONO, Mr.

MANZULLO, Mr. BURTON of Indiana, Mr. ROGERS of Michigan, Mr.

PORTMAN, Mr. RAMSTAD, Mr. PICKERING, Mr. SCHROCK, Mr. PUTNAM,

Mr. COBLE, Mr. STUMP, Mr. TIBERI, Ms. GRANGER, Mr. HANSEN, Mr.

MCINNIS, Mr. WEXLER, Mr. TANNER, Mr. GORDON, Mr. ACKERMAN, Mr.

BOYD, Mr. DAVIS of Illinois, Mrs. CAPPS, Ms. MCCARTHY of Missouri,

Ms. PELOSI, Mr. CRAMER, Ms. RIVERS, Mr. SCHIFF, Mr. WAXMAN, Ms.

WOOLSEY, Mr. LEVIN, Mr. HONDA, Mr. SMITH of Washington, Mr.

HALL of Ohio, Ms. LOFGREN, Mr. SERRANO, Mr. DEAL of Georgia, Mr.

ADERHOLT, Mr. KIRK, Mr. RILEY, Ms. ROS-LEHTINEN, Mr. GRAVES,

Mr. ALLEN, Mr. HINOJOSA, Mr. NEAL of Massachusetts, Ms.

MILLENDER-MCDONALD, Mr. POMEROY, Mr. FATTAH, Ms. SANCHEZ,

Mr. BARR of Georgia, Mr. VITTER, Mrs. NORTHUP, Mr. DIAZ-BALART,

Mr. CANTOR, Mrs. JOHNSON of Connecticut, Mr. CANNON, Mr. SHERMAN, Mr. LARSON of Connecticut, Mr. DOGGETT, Mr. MEEHAN, Mr.

HOBSON, Mr. HOSTETTLER, Mr. OSE, Mr. ISSA, Mr. DOOLEY of California, Ms. SOLIS, Ms. HARMAN, Mr. BROWN of South Carolina, Mr.

RADANOVICH, Mr. SOUDER, Mr. SPENCE, Mr. BRADY of Texas, Mr.

MCCRERY, Mr. BARRETT, Mr. CALVERT, Mr. SHUSTER, Mr. GREENWOOD, Mr. MALONEY of Connecticut, Mrs. LOWEY, Mr. OBEY, Mr.

EVERETT, Mr. TAYLOR of North Carolina, Mrs. BIGGERT, Mr. BUYER,

Mr. HALL of Texas, Mr. CULBERSON, and Mrs. DAVIS of California

JULY 12, 2001

The Committee on Ways and Means discharged; committed to the Committee

of the Whole House on the State of the Union and ordered to be printed

[For text of introduced bill, see copy of bill as introduced on March 21, 2001]

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,
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1 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

3 ‘‘Railroad Retirement and Survivors’ Improvement Act of

4 2001’’.

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

6 this Act is as follows:

Sec. 1. Short title; table of contents.

TITLE I—AMENDMENTS TO RAILROAD RETIREMENT ACT OF 1974

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

Sec. 102. Retirement age restoration.

Sec. 103. Vesting requirement.

Sec. 104. Repeal of railroad retirement maximum.

Sec. 105. Investment of railroad retirement assets.

Sec. 106. Elimination of supplemental annuity account.

Sec. 107. Transfer authority revisions.

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

Board.

TITLE II—AMENDMENTS TO THE INTERNAL REVENUE CODE OF

1986

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

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

Sec. 203. Repeal of supplemental annuity tax.

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

7 TITLE I—AMENDMENTS TO RAIL8 ROAD RETIREMENT ACT OF

9 1974

10 SEC. 101. EXPANSION OF WIDOW’S AND WIDOWER’S BENE11 FITS.

12 (a) IN GENERAL.—Section 4(g) of the Railroad Retire13 ment Act of 1974 (45 U.S.C. 231c(g)) is amended by adding

14 at the end the following new subdivision:

15 ‘‘(10)(i) If for any month the unreduced annuity pro16 vided under this section for a widow or widower is less than
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1 the widow’s or widower’s initial minimum amount com2 puted pursuant to paragraph (ii) of this subdivision, the

3 unreduced annuity shall be increased to that initial min4 imum amount. For the purposes of this subdivision, the un5 reduced annuity is the annuity without regard to any de6 duction on account of work, without regard to any reduc7 tion for entitlement to an annuity under section 2(a)(1)

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

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

10 without regard to any reduction for entitlement to a public

11 service pension pursuant to section 202(e)(7), 202(f)(2), or

12 202(g)(4) of the Social Security Act.

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

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

15 unreduced annuity computed at the time an annuity is

16 awarded to that widow or widower, except that—

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

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

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

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

21 appears.

22 ‘‘(iii) If a widow or widower who was previously enti23 tled to a widow’s or widower’s annuity under section

24 2(d)(1)(ii) of this Act becomes entitled to a widow’s or wid25 ower’s annuity under section 2(d)(1)(i) of this Act, a new
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1 initial minimum amount shall be computed at the time of

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

3 2(d)(1)(i) of this Act.’’.

4 (b) EFFECTIVE DATE.—

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

6 section shall take effect on the first day of the first

7 month that begins more than 30 days after enact8 ment, and shall apply to annuity amounts accruing

9 for months after the effective date in the case of annu10 ities awarded—

11 (A) on or after that date; and

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

13 amount under section 4(g) of the Railroad Re14 tirement Act of 1974 (45 U.S.C. 231c(g)) was

15 computed under such section, as amended by the

16 Omnibus Budget Reconciliation Act of 1981

17 (Public Law 97–35; 95 Stat. 357).

18 (2) SPECIAL RULE FOR ANNUITIES AWARDED BE19 FORE THE EFFECTIVE DATE.—In applying the

20 amendment made by this section to annuities award21 ed before the effective date, the calculation of the ini22 tial minimum amount under new section 4(g)(10)(ii)

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

24 231c(g)(10)(ii)), as added by subsection (a), shall be
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1 made as of the date of the award of the widow’s or

2 widower’s annuity.

3 SEC. 102. RETIREMENT AGE RESTORATION.

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

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

6 amended by inserting after ‘‘(2)’’ the following new sen7 tence: ‘‘For purposes of this subsection, individuals entitled

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

9 except for the purposes of recomputations in accordance

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

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

12 of the Social Security Act).’’.

13 (b) SPOUSE AND SURVIVOR ANNUITIES.—Section

14 4(a)(2) of the Railroad Retirement Act of 1974 (45 U.S.C.

15 231c(a)(2)) is amended by striking ‘‘if an’’ and all that

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

17 ‘‘a spouse entitled to an annuity under section

18 2(c)(1)(ii)(B) of this Act’’.

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

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

21 U.S.C. 231b(a)(3), 231c(a)(3), and 231c(a)(4)) are re22 pealed.

23 (d) EFFECTIVE DATES.—

24 (1) GENERALLY.—Except as provided in para25 graph (2), the amendments made by this section shall
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1 apply to annuities that begin to accrue on or after

2 January 1, 2002.

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

4 provided for a spouse under section 4(a) of the Rail5 road Retirement Act of 1974 (45 U.S.C. 231c(a))

6 shall be computed under section 4(a)(3) of such Act,

7 as in effect on December 31, 2001, if the annuity

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

9 U.S.C. 231b(a)) for the individual on whose employ10 ment record the spouse annuity is based was com11 puted under section 3(a)(3) of such Act, as in effect

12 on December 31, 2001.

13 SEC. 103. VESTING REQUIREMENT.

14 (a) CERTAIN ANNUITIES FOR INDIVIDUALS.—Section

15 2(a) of the Railroad Retirement Act of 1974 (45 U.S.C.

16 231a(a)) is amended—

17 (1) by inserting in subdivision (1) ‘‘(or, for pur18 poses of paragraphs (i), (iii), and (v), five years of

19 service, all of which accrues after December 31,

20 1995)’’ after ‘‘ten years of service’’; and

21 (2) by adding at the end the following new sub22 division:

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

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

25 have at least ten years of service, shall, prior to the month
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1 in which the individual attains age 62, be entitled only to

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

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

4 3(f)(3) of this Act. Upon attainment of age 62, such an in5 dividual may also be entitled to an annuity amount com6 puted under section 3(b), but such annuity amount shall

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

8 the individual were entitled to an annuity under section

9 2(a)(1)(iii).’’.

10 (b) COMPUTATION RULE FOR INDIVIDUALS’ ANNU11 ITIES.—Section 3(a) of the Railroad Retirement Act of

12 1974 (45 U.S.C. 231b(a)), as amended by section 102 of

13 this Act, is further amended by adding at the end the fol14 lowing new subdivision:

15 ‘‘(3) If an individual entitled to an annuity under sec16 tion 2(a)(1)(i) or (iii) of this Act on the basis of less than

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

18 202(a), section 202(b), or section 202(c) of the Social Secu19 rity Act which began to accrue before the annuity under

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

21 provided such individual under this subsection, shall be

22 computed as though the annuity under this Act began to

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

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

25 the Social Security Act began, or (B) the date on which
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1 the individual first met the conditions for entitlement to

2 an age reduced annuity under this Act other than the condi3 tions set forth in sections 2(e)(1) and 2(e)(2) of this Act

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

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

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

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

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

9 of service’’.

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

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

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

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

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

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

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

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

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

19 4(f) of this Act unless the individual, or the individual’s

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

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

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

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

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

25 Section 4(a) of the Railroad Retirement Act of 1974 (45
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1 U.S.C. 231c(a)), as amended by section 102 of this Act, is

2 further amended by adding at the end the following new

3 subdivision:

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

5 2(c)(1)(ii)(A), section 2(c)(1)(ii)(C), or section 2(c)(2) of

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

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

8 record of an employee who will have completed less than

9 10 years of service is entitled to a benefit under section

10 202(a), section 202(b), or section 202(c) of the Social Secu11 rity Act which began to accrue before the annuity under

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

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

14 under this subsection shall be computed as though the annu15 ity under this Act began to accrue on the later of (A) the

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

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

18 or (B) the first date on which the annuitant met the condi19 tions for entitlement to an age reduced annuity under this

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

21 and 2(e)(2) of this Act and the requirement that an applica22 tion be filed.’’.

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

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

25 is amended by striking the second sentence and inserting
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1 the following new sentence: ‘‘An application filed with the

2 Board for an employee annuity, spouse annuity, or di3 vorced spouse annuity on the basis of the employment

4 record of an employee who will have completed less than

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

6 for any benefit to which such applicant may be entitled

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

8 202(c) of the Social Security Act. An application filed with

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

10 record of an employee who will have completed ten years

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

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

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

14 Social Security Act.’’.

15 (g) CREDITING SERVICE UNDER THE SOCIAL SECU16 RITY ACT.—Section 18(2) of the Railroad Retirement Act

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

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

20 after ‘‘ten years of service’’ every place it appears;

21 and

22 (2) by inserting ‘‘(or five or more years of serv23 ice, all of which accrues after December 31, 1995)’’

24 after ‘‘ten or more years of service’’.
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1 (h) AUTOMATIC BENEFIT ELIGIBILITY ADJUST2 MENTS.—Section 19 of the Railroad Retirement Act of 1974

3 (45 U.S.C. 231r) is amended—

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

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

7 (2) by inserting ‘‘(or five or more years of serv8 ice, all of which accrues after December 31, 1995)’’

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

10 (i) CONFORMING AMENDMENTS.—

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

12 Act of 1974 (45 U.S.C. 231e(1)) is amended by insert13 ing ‘‘(or five or more years of service, all of which ac14 crues after December 31, 1995)’’ after ‘‘ten years of

15 service’’.

16 (2) Section 7(b)(2)(A) of the Railroad Retire17 ment Act of 1974 (45 U.S.C. 231f(b)(2)(A)) is amend18 ed by inserting ‘‘(or five or more years of service, all

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

20 years of service’’.

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

22 U.S.C. 405(i)) 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 (4) Section 6(b)(2) of the Railroad Retirement

2 Act of 1974 (45 U.S.C. 231e(b)(2)) is amended by in3 serting ‘‘(or five or more years of service, all of which

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

5 service’’ the second place it appears.

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

7 section shall take effect on January 1, 2002.

8 SEC. 104. REPEAL OF RAILROAD RETIREMENT MAXIMUM.

9 (a) EMPLOYEE ANNUITIES.—

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

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

12 amended—

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

14 (B) by redesignating subdivisions (2) and

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

16 (2) CONFORMING AMENDMENTS.—

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

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

19 231b(f)(1)), as redesignated by paragraph

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

21 to the provisions of subdivision (1) of this sub22 section,’’.

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

24 7(d)(2) of the Railroad Retirement Act of 1974

25 (45 U.S.C. 231f(d)(2)) are each amended by
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1 striking ‘‘section 3(f)(3)’’ and inserting ‘‘section

2 3(f)(2)’’.

3 (b) SPOUSE AND SURVIVOR ANNUITIES.—Section 4 of

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

5 amended by striking subsection (c).

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

7 section shall take effect on January 1, 2002, and shall apply

8 to annuity amounts accruing for months after December

9 2001.

10 SEC. 105. INVESTMENT OF RAILROAD RETIREMENT ASSETS.

11 (a) ESTABLISHMENT OF RAILROAD RETIREMENT IN12 VESTMENT TRUST.—Section 15 of the Railroad Retirement

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

14 subsection (i) the following new subsection:

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

16 ‘‘(1) ESTABLISHMENT.—The Railroad Retire17 ment Investment Trust (hereinafter in this subsection

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

19 trust domiciled in the District of Columbia and shall,

20 to the extent not inconsistent with this Act, be subject

21 to the laws of the District of Columbia applicable to

22 such trusts. The Trust shall manage and invest its as23 sets in the manner set forth in this subsection.

24 ‘‘(2) NOT A FEDERAL AGENCY OR INSTRUMEN25 TALITY.—The Trust is not a department, agency, or
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1 instrumentality of the Government of the United

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

3 States Code.

4 ‘‘(3) BOARD OF TRUSTEES.—

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

6 Board of Trustees, consisting of 7 members, each

7 appointed by a unanimous vote of the Railroad

8 Retirement Board. The Railroad Retirement

9 Board may remove any member so appointed by

10 unanimous vote. Of the members, 3 shall rep11 resent the interests of labor, 3 shall represent the

12 interests of management, and 1 shall represent

13 the interests of the general public. The members

14 of the Board of Trustees shall not be considered

15 officers or employees of the Government of the

16 United States.

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

18 Board of Trustees shall be appointed only from

19 among persons who have experience and exper20 tise in the management of financial investments

21 and pension plans. No member of the Railroad

22 Retirement Board shall be eligible to be a mem23 ber of the Board of Trustees.

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

25 subparagraph, each member shall be appointed
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1 for a 3-year term. The initial members ap2 pointed under this paragraph shall be divided

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

4 one group will be appointed for a 1-year term,

5 one for a 2-year term, and one for a 3-year term.

6 A vacancy in the Board of Trustees shall not af7 fect the powers of the Board of Trustees and shall

8 be filled in the same manner as the selection of

9 the member whose departure caused the vacancy.

10 Upon the expiration of a term of a member of

11 the Board of Trustees, that member shall con12 tinue to serve until a successor is appointed.

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

14 The Board of Trustees shall—

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

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

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

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

22 the policies adopted in subparagraph (A);

23 ‘‘(D) pay administrative expenses of the

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

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

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

5 ‘‘(5) REPORTING REQUIREMENTS AND FIDUCIARY

6 STANDARDS.—The following reporting requirements

7 and fiduciary standards shall apply with respect to

8 the Trust:

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

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

14 through it, the participants and beneficiaries of

15 the programs funded under this Act—

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

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

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

21 of the Trust;

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

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

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

3 ‘‘(iii) by diversifying investments so as

4 to minimize the risk of large losses, unless

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

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

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

11 ‘‘(B) PROHIBITIONS WITH RESPECT TO

12 MEMBERS OF THE BOARD OF TRUSTEES.—No

13 member of the Board of Trustees shall—

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

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

16 own account;

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

18 capacity act in any transaction involving

19 the assets of the Trust on behalf of a party

20 (or represent a party) whose interests are

21 adverse to the interests of the Trust, the

22 Railroad Retirement Board, or the interests

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

2 trustee’s own personal account from any

3 party dealing with the assets of the Trust.

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

7 responsibility or liability for any responsibility,

8 obligation, or duty under this Act shall be void:

9 Provided, however, That nothing shall

10 preclude—

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

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

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

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

20 from and for his own account; or

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

23 cover potential liability of one or more

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

2 this section.

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

4 person who handles funds or other property of

5 the Trust (hereafter in this subsection referred to

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

7 shall provide protection to the Trust against loss

8 by reason of acts of fraud or dishonesty on the

9 part of any Trust official, directly or through the

10 connivance of others, and shall be in accordance

11 with the following:

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

13 fixed at the beginning of each fiscal year of

14 the Trust by the Railroad Retirement

15 Board. Such amount shall not be less than

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

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

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

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

22 10 per centum limitation of the preceding

23 sentence.

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

25 official to receive, handle, disburse, or other-
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1 wise exercise custody or control of any of

2 the funds or other property of the Trust

3 without being bonded as required by this

4 subsection and it shall be unlawful for any

5 Trust official, or any other person having

6 authority to direct the performance of such

7 functions, to permit such functions, or any

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

10 of this subsection have not been met.

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

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

15 whose business operations such person has

16 any control or significant financial interest,

17 direct or indirect.

18 ‘‘(E) AUDIT AND REPORT.—

19 ‘‘(i) The Trust shall annually engage

20 an independent qualified public accountant

21 to audit the financial statements of the

22 Trust.

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

24 management report to the Congress not

25 later than 180 days after the end of the
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1 Trust’s fiscal year. A management report

2 under this subsection shall include—

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

5 ‘‘(II) a statement of operations;

6 ‘‘(III) a statement of cash flows;

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

9 systems;

10 ‘‘(V) the report resulting from an

11 audit of the financial statements of the

12 Trust conducted under clause (i); and

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

17 ‘‘(iii) The Trust shall provide the

18 President, the Railroad Retirement Board,

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

21 report when it is submitted to Congress.

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

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

25 the Trust, its Board of Trustees, or its em-
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1 ployees or agents that violates any provi2 sion of this Act; or

3 ‘‘(ii) to obtain other appropriate relief

4 to redress such violations, or to enforce any

5 provisions of this Act.

6 ‘‘(6) APPLICATION OF FIDUCIARY STANDARDS TO

7 RAILROAD RETIREMENT BOARD.—

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

10 Railroad Retirement Board in the discharge of

11 their duty to appoint the members of the Board

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

13 manner as such provisions apply to the members

14 of the Board of Trustees.

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

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

17 shall apply by substituting ‘the Secretary of

18 Labor’ for ‘the Railroad Retirement Board’.

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

20 The Board of Trustees shall have the authority to

21 make rules to govern its operations, employ profes22 sional staff, and contract with outside advisers, in23 cluding the Railroad Retirement Board, to provide

24 legal, accounting, investment advisory, or other serv25 ices necessary for the proper administration of this
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1 subsection. In the case of contracts with investment

2 advisory services, compensation for such services may

3 be on a fixed contract fee basis or on such other terms

4 and conditions as are customary for such services.

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

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

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

9 the Board of Trustees shall be decided by a majority

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

11 of Trustees shall be entered upon the records of the

12 Board of Trustees.

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

14 the Board of Trustees incurred under this subsection

15 shall be paid from the Trust.’’.

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

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

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

20 Benefits Payments Account’’ and all that follows

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

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

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

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

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

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

6 section shall take effect on the first day of the month that

7 begins more than 30 days after enactment.

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

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

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

12 amended by striking ‘‘payments of supplemental annuities

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

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

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

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

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

21 those portions of the amounts covered into the Treasury

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

23 end of the subsection and inserting a period.

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

2 December 31, 2001, the Railroad Retirement Board

3 shall—

4 (A) determine the amount of funds in the

5 Railroad Retirement Supplemental Account

6 under section 15(c) of the Railroad Retirement

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

8 of such determination; and

9 (B) direct the Secretary of the Treasury to

10 transfer such funds to the Railroad Retirement

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

12 (as added by section 105).

13 (2) TRANSFER BY THE SECRETARY OF THE

14 TREASURY.—The Secretary of the Treasury shall

15 make the transfer described in paragraph (1).

16 (e) EFFECTIVE DATE.—

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

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

19 shall take effect January 1, 2002.

20 (2) ACCOUNT IN EXISTENCE UNTIL TRANSFER

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

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

24 exist until the date that the Secretary of the Treasury

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

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

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

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

5 subsection:

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

7 upon establishment of the Railroad Retirement Investment

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

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

12 is not needed to pay current administrative expenses of the

13 Board to the Railroad Retirement Investment Trust. The

14 Secretary shall make that transfer.’’.

15 (b) TRANSFERS FROM THE RAILROAD RETIREMENT

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

19 (k) the following new subsection:

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

21 The Railroad Retirement Investment Trust shall from time

22 to time transfer to the disbursing agent described in section

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

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

25 be necessary to pay benefits under this Act (other than bene-
29

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1 fits paid from the Social Security Equivalent Benefit Ac2 count or the Dual Benefit Payments Account).’’.

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

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

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

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

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

9 Investment Trust and from time to time thereafter, the

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

11 in such manner as will maximize the investment returns

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

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

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

17 Any balance transferred under this paragraph shall be used

18 by the Railroad Retirement Investment Trust only to pay

19 benefits under this Act or to purchase obligations of the

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

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

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

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

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

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

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

5 from time to time transfer to the disbursing agent

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

7 benefits.’’.

8 (3) CONFORMING AMENDMENT.—Section

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

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

12 (d) DUAL BENEFITS PAYMENTS ACCOUNT.—Section

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

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

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

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

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

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

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

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

22 follows:

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

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

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

5 effect of that arrangement, benefits shall be paid as under

6 the law in effect prior to the enactment of the Railroad Re7 tirement and Survivors’ Improvement Act of 2001.

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

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

10 required to be transferred from the Social Security

11 Equivalent Benefit Account and the Dual Benefits

12 Payments Account to the disbursing agent to make

13 payments of benefits and the Secretary of the Treas14 ury shall transfer those amounts;

15 ‘‘(ii) to the Board of Trustees of the Railroad Re16 tirement Investment Trust the amounts required to be

17 transferred from the Railroad Retirement Investment

18 Trust to the disbursing agent to make payments of

19 benefits and the Board of Trustees shall transfer those

20 amounts; and

21 ‘‘(iii) to the disbursing agent the name and ad22 dress of each individual entitled to receive a payment,

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

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

3 amended—

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

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

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

7 from the Railroad Retirement Investment Trust or the

8 Social Security Equivalent Benefit Account, as the

9 case may be’’; and

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

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

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

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

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

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

18 the Treasury to design an appropriate method to transfer

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

20 to convert such obligations to cash at the discretion of the

21 Railroad Retirement Board prior to transfer. The Railroad

22 Retirement Investment Trust may hold to maturity any ob23 ligations so received or may redeem them prior to maturity,

24 as the Trust deems appropriate.
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1 SEC. 108. ANNUAL RATIO PROJECTIONS AND CERTIFI2 CATIONS BY THE RAILROAD RETIREMENT

3 BOARD.

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

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

6 amended—

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

9 year beginning in 2003, the Railroad Retirement

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

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

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

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

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

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

21 end the following new section:

22 ‘‘COMPUTATION AND CERTIFICATION OF ACCOUNT BENEFIT

23 RATIOS

24 ‘‘SEC. 23. (a) INITIAL COMPUTATION AND CERTIFI25 CATION.—On or before November 1, 2003, the Railroad Re26 tirement Board shall—
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1 ‘‘(1) compute the account benefits ratios for each

2 of the most recent 10 preceding fiscal years, and

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

4 such fiscal year to the Secretary of the Treasury.

5 ‘‘(b) COMPUTATIONS AND CERTIFICATIONS AFTER

6 2003.—On or before November 1 of each year after 2003,

7 the Railroad Retirement Board shall—

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

9 fiscal year ending in such year, and

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

11 fiscal year to the Secretary of the Treasury.

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

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

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

15 TITLE II—AMENDMENTS TO THE

16 INTERNAL REVENUE CODE OF

17 1986

18 SEC. 201. AMENDMENTS TO THE INTERNAL REVENUE CODE

19 OF 1986.

20 Except as otherwise provided, whenever in this title

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

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

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

4 at the end the following new paragraph:

5 ‘‘(28) The Railroad Retirement Investment Trust

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

8 SEC. 203. REPEAL OF SUPPLEMENTAL ANNUITY TAX.

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

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

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

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

15 section shall apply to calendar years beginning after De16 cember 31, 2001.

17 SEC. 204. EMPLOYER, EMPLOYEE REPRESENTATIVE, AND

18 EMPLOYEE TIER 2 TAX RATE ADJUSTMENTS.

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

20 section 3221 is amended to read as follows:

21 ‘‘(b) TIER 2 TAX.—

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

23 there is hereby imposed on every employer an excise

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

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

2 services rendered to such employer.

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

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

5 means—

6 ‘‘(A) 15.6 percent in the case of compensa7 tion paid during 2002,

8 ‘‘(B) 14.2 percent in the case of compensa9 tion paid during 2003, and

10 ‘‘(C) in the case of compensation paid dur11 ing any calendar year after 2003, the percentage

12 determined under section 3241 for such calendar

13 year.’’.

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

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

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

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

23 representative. For purposes of the preceding sentence, the

24 term ‘applicable percentage’ means the percentage equal to

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

3 ‘‘(b) TIER 2 TAX.—

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

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

7 percentage of the compensation received during any

8 calendar year by such employee representatives for

9 services rendered by such employee representative.

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

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

12 means—

13 ‘‘(A) 14.75 percent in the case of compensa14 tion received during 2002,

15 ‘‘(B) 14.20 percent in the case of compensa16 tion received during 2003, and

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

18 during any calendar year after 2003, the per19 centage determined under section 3241 for such

20 calendar year.

21 ‘‘(c) CROSS REFERENCE.—

‘‘For application of different contribution bases

with respect to the taxes imposed by subsections (a)

and (b), see section 3231(e)(2).’’.

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

23 section 3201 is amended to read as follows:

24 ‘‘(b) TIER 2 TAX.—
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1 ‘‘(1) IN GENERAL.—In addition to other taxes,

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

4 compensation received during any calendar year by

5 such employee for services rendered by such employee.

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

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

8 means—

9 ‘‘(A) 4.90 percent in the case of compensa10 tion received during 2002 or 2003, and

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

12 during any calendar year after 2003, the per13 centage determined under section 3241 for such

14 calendar year.’’.

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

17 ‘‘Subchapter E—Tier 2 Tax Rate

18 Determination

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

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

20 ON AVERAGE ACCOUNT BENEFITS RATIO.

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

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

24 the table in subsection (b).
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1 ‘‘(b) TAX RATE SCHEDULE.—

‘‘Average account benefits ratio Applicable percentage for sections 3211(b) and

3221(b)

Applicable percentage for section

At least But less than 3201(b)

2.5 22.1 4.9

2.5 3.0 18.1 4.9

3.0 3.5 15.1 4.9

3.5 4.0 14.1 4.9

4.0 6.1 13.1 4.9

6.1 6.5 12.6 4.4

6.5 7.0 12.1 3.9

7.0 7.5 11.6 3.4

7.5 8.0 11.1 2.9

8.0 8.5 10.1 1.9

8.5 9.0 9.1 0.9

9.0 8.2 0

2 ‘‘(c) DEFINITIONS RELATED TO DETERMINATION OF

3 RATES OF TAX.—

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

5 purposes of this section, the term ‘average account

6 benefits ratio’ means, with respect to any calendar

7 year, the average determined by the Secretary of the

8 account benefits ratios for the 10 most recent fiscal

9 years ending before such calendar year. If the amount

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

12 next highest multiple of 0.1.

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

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

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

16 determined by the Railroad Retirement Board by di17 viding the fair market value of the assets in the Rail-
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1 road Retirement Account and of the Railroad Retire2 ment Investment Trust (and for years before 2002, the

3 Social Security Equivalent Benefits Account) as of

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

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

8 ‘‘(d) NOTICE.—No later than December 1 of each cal9 endar year, the Secretary shall publish a notice in the Fed10 eral Register of the rates of tax determined under this sec11 tion which are applicable for the following calendar year.’’.

12 (e) CONFORMING AMENDMENTS.—

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

15 3211(a)’’.

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

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

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

20 and inserting ‘‘3211(a)’’.

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

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

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

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

‘‘Subchapter E. Tier 2 tax rate determination.’’.
41

•HR 1140 RH

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

2 section shall apply to calendar years beginning after De3 cember 31, 2001.
Union Calendar No. 77

107TH CONGRESS

1ST SESSION H. R. 1140

[Report No. 107–82, Part I]

A BILL

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

employees and beneficiaries.

JULY 12, 2001

The Committee on Ways and Means discharged; committed to the Committee of the Whole House on the

State of the Union and ordered to be printed