IIB

107TH CONGRESS

1ST SESSION H. R. 1140

IN THE SENATE OF THE UNITED STATES

AUGUST 1, 2001

Received; read twice and referred to the Committee on Finance

AN ACT

To modernize the financing of the railroad retirement system

and to provide enhanced benefits to employees and beneficiaries.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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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 National 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 Re13 tirement Act of 1974 (45 U.S.C. 231c(g)) is amended by

14 adding at the end the following new subdivision:
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1 ‘‘(10)(i) If for any month the unreduced annuity pro2 vided under this section for a widow or widower is less

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

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

5 the unreduced annuity shall be increased to that initial

6 minimum amount. For the purposes of this subdivision,

7 the unreduced annuity is the annuity without regard to

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

9 reduction for entitlement to an annuity under section

10 2(a)(1) of this Act, without regard to any reduction for

11 entitlement to a benefit under title II of the Social Secu12 rity Act, and without regard to any reduction for entitle13 ment to a public service pension pursuant to section

14 202(e)(7), 202(f)(2), or 202(g)(4) of the Social Security

15 Act.

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

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

18 unreduced annuity computed at the time an annuity is

19 awarded to that widow or widower, except that—

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

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

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

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

24 it appears.
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1 ‘‘(iii) If a widow or widower who was previously enti2 tled to a widow’s or widower’s annuity under section

3 2(d)(1)(ii) of this Act becomes entitled to a widow’s or

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

5 new initial minimum amount shall be computed at the

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

7 section 2(d)(1)(i) of this Act.’’.

8 (b) EFFECTIVE DATE.—

9 (1) IN GENERAL.—The amendment made by

10 this section shall take effect on the first day of the

11 first month that begins more than 30 days after en12 actment, and shall apply to annuity amounts accru13 ing for months after the effective date in the case

14 of annuities awarded—

15 (A) on or after that date; and

16 (B) before that date, but only if the annu17 ity amount under section 4(g) of the Railroad

18 Retirement Act of 1974 (45 U.S.C. 231c(g))

19 was computed under such section, as amended

20 by the Omnibus Budget Reconciliation Act of

21 1981 (Public Law 97–35; 95 Stat. 357).

22 (2) SPECIAL RULE FOR ANNUITIES AWARDED

23 BEFORE THE EFFECTIVE DATE.—In applying the

24 amendment made by this section to annuities award25 ed before the effective date, the calculation of the
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1 initial minimum amount under new section

2 4(g)(10)(ii) of the Railroad Retirement Act of 1974

3 (45 U.S.C. 231c(g)(10)(ii)), as added by subsection

4 (a), shall be made as of the date of the award of the

5 widow’s or widower’s annuity.

6 SEC. 102. RETIREMENT AGE RESTORATION.

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

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

9 is amended by inserting after ‘‘(2)’’ the following new sen10 tence: ‘‘For purposes of this subsection, individuals enti11 tled to an annuity under section 2(a)(1)(ii) of this Act

12 shall, except for the purposes of recomputations in accord13 ance with section 215(f) of the Social Security Act, be

14 deemed to have attained retirement age (as defined by sec15 tion 216(l) of the Social Security Act).’’.

16 (b) SPOUSE AND SURVIVOR ANNUITIES.—Section

17 4(a)(2) of the Railroad Retirement Act of 1974 (45 U.S.C.

18 231c(a)(2)) is amended by striking ‘‘if an’’ and all that

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

20 ‘‘a spouse entitled to an annuity under section

21 2(c)(1)(ii)(B) of this Act’’.

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

23 4(a)(3), and 4(a)(4) of the Railroad Retirement Act of

24 1974 (45 U.S.C. 231b(a)(3), 231c(a)(3), and 231c(a)(4))

25 are repealed.
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1 (d) EFFECTIVE DATES.—

2 (1) GENERALLY.—Except as provided in para3 graph (2), the amendments made by this section

4 shall apply to annuities that begin to accrue on or

5 after January 1, 2002.

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

7 provided for a spouse under section 4(a) of the Rail8 road Retirement Act of 1974 (45 U.S.C. 231c(a))

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

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

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

12 U.S.C. 231b(a)) for the individual on whose employ13 ment record the spouse annuity is based was com14 puted under section 3(a)(3) of such Act, as in effect

15 on December 31, 2001.

16 SEC. 103. VESTING REQUIREMENT.

17 (a) CERTAIN ANNUITIES FOR INDIVIDUALS.—Section

18 2(a) of the Railroad Retirement Act of 1974 (45 U.S.C.

19 231a(a)) is amended—

20 (1) by inserting in subdivision (1) ‘‘(or, for pur21 poses of paragraphs (i), (iii), and (v), five years of

22 service, all of which accrues after December 31,

23 1995)’’ after ‘‘ten years of service’’; and

24 (2) by adding at the end the following new sub25 division:
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1 ‘‘(4) An individual who is entitled to an annuity

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

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

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

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

6 Act (without regard to section 3(a)(2) of this Act) or sec7 tion 3(f)(3) of this Act. Upon attainment of age 62, such

8 an individual may also be entitled to an annuity amount

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

10 shall be reduced for early retirement in the same manner

11 as if the individual were entitled to an annuity under sec12 tion 2(a)(1)(iii).’’.

13 (b) COMPUTATION RULE FOR INDIVIDUALS’ ANNU14 ITIES.—Section 3(a) of the Railroad Retirement Act of

15 1974 (45 U.S.C. 231b(a)), as amended by section 102 of

16 this Act, is further amended by adding at the end the fol17 lowing new subdivision:

18 ‘‘(3) If an individual entitled to an annuity under sec19 tion 2(a)(1)(i) or (iii) of this Act on the basis of less than

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

21 202(a), section 202(b), or section 202(c) of the Social Se22 curity Act which began to accrue before the annuity under

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

24 provided such individual under this subsection, shall be

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

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

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

4 the individual first met the conditions for entitlement to

5 an age reduced annuity under this Act other than the con6 ditions set forth in sections 2(e)(1) and 2(e)(2) of this Act

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

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

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

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

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

12 of service’’.

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

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

15 is amended by adding at the end the following new sub16 section:

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

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

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

20 years of service, and the spouse, divorced spouse, and sur21 vivors of such individual, shall not be entitled to an annu22 ity amount provided under section 3(a), section 4(a), or

23 section 4(f) of this Act unless the individual, or the indi24 vidual’s spouse, divorced spouse, or survivors, would be en25 titled to a benefit under title II of the Social Security Act
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1 on the basis of the individual’s employment record under

2 both this Act and title II of the Social Security Act.’’.

3 (e) COMPUTATION RULE FOR SPOUSES’ ANNU4 ITIES.—Section 4(a) of the Railroad Retirement Act of

5 1974 (45 U.S.C. 231c(a)), as amended by section 102 of

6 this Act, is further amended by adding at the end the fol7 lowing new subdivision:

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

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

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

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

12 record of an employee who will have completed less than

13 10 years of service is entitled to a benefit under section

14 202(a), section 202(b), or section 202(c) of the Social Se15 curity Act which began to accrue before the annuity under

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

17 2(c)(2), or section 2(c)(4) of this Act, the annuity amount

18 provided under this subsection shall be computed as

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

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

21 202(a), section 202(b), or section 202(c) of the Social Se22 curity Act began or (B) the first date on which the annu23 itant met the conditions for entitlement to an age reduced

24 annuity under this Act other than the conditions set forth
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1 in sections 2(e)(1) and 2(e)(2) of this Act and the require2 ment that an application be filed.’’.

3 (f) APPLICATION DEEMING PROVISION.—Section

4 5(b) of the Railroad Retirement Act of 1974 (45 U.S.C.

5 231d(b)) is amended by striking the second sentence and

6 inserting the following new sentence: ‘‘An application filed

7 with the Board for an employee annuity, spouse annuity,

8 or divorced spouse annuity on the basis of the employment

9 record of an employee who will have completed less than

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

11 for any benefit to which such applicant may be entitled

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

13 202(c) of the Social Security Act. An application filed with

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

15 record of an employee who will have completed ten years

16 of service shall, unless the applicant specified otherwise,

17 be deemed to be an application for any benefit to which

18 such applicant may be entitled under this Act or title II

19 of the Social Security Act.’’.

20 (g) CREDITING SERVICE UNDER THE SOCIAL SECU21 RITY ACT.—Section 18(2) of the Railroad Retirement Act

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

23 (1) by inserting ‘‘(or less than five years of

24 service, all of which accrues after December 31,
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1 1995)’’ after ‘‘ten years of service’’ every place it ap2 pears; and

3 (2) by inserting ‘‘(or five or more years of serv4 ice, all of which accrues after December 31, 1995)’’

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

6 (h) AUTOMATIC BENEFIT ELIGIBILITY ADJUST7 MENTS.—Section 19 of the Railroad Retirement Act of

8 1974 (45 U.S.C. 231r) is amended—

9 (1) by inserting ‘‘(or five or more years of serv10 ice, all of which accrues after December 31, 1995)’’

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

12 (2) by inserting ‘‘(or five or more years of serv13 ice, all of which accrues after December 31, 1995)’’

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

15 (i) CONFORMING AMENDMENTS.—

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

17 Act of 1974 (45 U.S.C. 231e(1)) is amended by in18 serting ‘‘(or five or more years of service, all of

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

20 years of service’’.

21 (2) Section 7(b)(2)(A) of the Railroad Retire22 ment Act of 1974 (45 U.S.C. 231f(b)(2)(A)) is

23 amended by inserting ‘‘(or five or more years of

24 service, all of which accrues after December 31,

25 1995)’’ after ‘‘ten years of service’’.
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1 (3) Section 205(i) of the Social Security Act

2 (42 U.S.C. 405(i)) is amended by inserting ‘‘(or five

3 or more years of service, all of which accrues after

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

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

6 Act of 1974 (45 U.S.C. 231e(b)(2)) is amended by

7 inserting ‘‘(or five or more years of service, all of

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

9 years of service’’ the second place it appears.

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

11 this section shall take effect on January 1, 2002.

12 SEC. 104. REPEAL OF RAILROAD RETIREMENT MAXIMUM.

13 (a) EMPLOYEE ANNUITIES.—

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

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

16 amended—

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

18 (B) by redesignating subdivisions (2) and

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

20 (2) CONFORMING AMENDMENTS.—

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

22 the Railroad Retirement Act of 1974 (45

23 U.S.C. 231b(f)(1)), as redesignated by para24 graph (1)(B), is amended by striking ‘‘, without
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1 regard to the provisions of subdivision (1) of

2 this subsection,’’.

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

4 7(d)(2) of the Railroad Retirement Act of 1974

5 (45 U.S.C. 231f(d)(2)) are each amended by

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

7 3(f)(2)’’.

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

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

10 is amended by striking subsection (c).

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

12 this section shall take effect on January 1, 2002, and shall

13 apply to annuity amounts accruing for months after De14 cember 2001.

15 SEC. 105. INVESTMENT OF RAILROAD RETIREMENT ASSETS.

16 (a) ESTABLISHMENT OF NATIONAL RAILROAD RE17 TIREMENT INVESTMENT TRUST.—Section 15 of the Rail18 road Retirement Act of 1974 (45 U.S.C. 231n) is amend19 ed by inserting after subsection (i) the following new sub20 section:

21 ‘‘(j) NATIONAL RAILROAD RETIREMENT INVEST22 MENT TRUST.—

23 ‘‘(1) ESTABLISHMENT.—The National Railroad

24 Retirement Investment Trust (hereinafter in this

25 subsection referred to as the ‘Trust’) is hereby es-
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1 tablished as a trust domiciled in the District of Co2 lumbia and shall, to the extent not inconsistent with

3 this Act, be subject to the laws of the District of Co4 lumbia applicable to such trusts. The Trust shall

5 manage and invest its assets in the manner set forth

6 in this subsection.

7 ‘‘(2) NOT A FEDERAL AGENCY OR INSTRUMEN8 TALITY.—The Trust is not a department, agency, or

9 instrumentality of the Government of the United

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

11 States Code.

12 ‘‘(3) BOARD OF TRUSTEES.—

13 ‘‘(A) GENERALLY.—

14 ‘‘(i) MEMBERSHIP.—The Trust shall

15 have a Board of Trustees, consisting of 7

16 members. Three shall represent the inter17 ests of labor, 3 shall represent the interests

18 of management, and 1 shall be an inde19 pendent Trustee. The members of the

20 Board of Trustees shall not be considered

21 officers or employees of the Government of

22 the United States.

23 ‘‘(ii) SELECTION.—

24 ‘‘(I) The 3 members representing

25 the interests of labor shall be selected
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1 by the joint recommendation of labor

2 organizations, national in scope, orga3 nized in accordance with section 2 of

4 the Railway Labor Act, and representing at least 2 5 ⁄3 of all active em6 ployees, represented by such national

7 labor organizations, covered under

8 this Act.

9 ‘‘(II) The 3 members rep10 resenting the interests of management

11 shall be selected by the joint rec12 ommendation of carriers as defined in

13 section 1 of the Railway Labor Act

employing at least 2 14 ⁄3 of all active em15 ployees covered under this Act.

16 ‘‘(III) The independent member

17 shall be selected by a majority of the

18 other 6 members of the Board of

19 Trustees.

20 A member of the Board of Trustees may

21 be removed in the same manner and by the

22 same constituency that selected that mem23 ber.

24 ‘‘(iii) DISPUTE RESOLUTION.—In the

25 event that the parties specified in sub-
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1 clause (I), (II), or (III) of the previous

2 clause cannot agree on the selection of

3 Trustees within 60 days of the date of en4 actment or 60 days from any subsequent

5 date that a position of the Board of Trust6 ees becomes vacant, an impartial umpire to

7 decide such dispute shall, on the petition of

8 a party to the dispute, be appointed by the

9 District Court of the United States for the

10 District of Columbia.

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

12 Board of Trustees shall be appointed only from

13 among persons who have experience and exper14 tise in the management of financial investments

15 and pension plans. No member of the Railroad

16 Retirement Board shall be eligible to be a mem17 ber of the Board of Trustees.

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

19 subparagraph, each member shall be appointed

20 for a 3-year term. The initial members ap21 pointed under this paragraph shall be divided

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

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

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

25 term. The Trustee initially selected pursuant to
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1 clause (ii)(III) shall be appointed to a 3-year

2 term. A vacancy in the Board of Trustees shall

3 not affect the powers of the Board of Trustees

4 and shall be filled in the same manner as the

5 selection of the member whose departure caused

6 the vacancy. Upon the expiration of a term of

7 a member of the Board of Trustees, that mem8 ber shall continue to serve until a successor is

9 appointed.

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

11 The Board of Trustees shall—

12 ‘‘(A) retain independent advisers to assist

13 it in the formulation and adoption of its invest14 ment guidelines;

15 ‘‘(B) retain independent investment man16 agers to invest the assets of the Trust in a

17 manner consistent with such investment guide18 lines;

19 ‘‘(C) invest assets in the Trust, pursuant

20 to the policies adopted in subparagraph (A);

21 ‘‘(D) pay administrative expenses of the

22 Trust from the assets in the Trust; and

23 ‘‘(E) transfer money to the disbursing

24 agent or as otherwise provided in section
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1 7(b)(4), to pay benefits payable under this Act

2 from the assets of the Trust.

3 ‘‘(5) REPORTING REQUIREMENTS AND FIDU4 CIARY STANDARDS.—The following reporting re5 quirements and fiduciary standards shall apply with

6 respect to the Trust:

7 ‘‘(A) DUTIES OF THE BOARD OF TRUST8 EES.—The Trust and each member of the

9 Board of Trustees shall discharge their duties

10 (including the voting of proxies) with respect to

11 the assets of the Trust solely in the interest of

12 the Railroad Retirement Board and through it,

13 the participants and beneficiaries of the pro14 grams funded under this Act—

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

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

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

20 of the Trust;

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

22 and diligence under the circumstances then

23 prevailing that a prudent person acting in

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

2 aims;

3 ‘‘(iii) by diversifying investments so as

4 to minimize the risk of large losses and to

5 avoid disproportionate influence over a

6 particular industry or firm, unless under

7 the circumstances it is clearly prudent not

8 to do so; and

9 ‘‘(iv) in accordance with Trust gov10 erning documents and instruments insofar

11 as such documents and instruments are

12 consistent with this Act.

13 ‘‘(B) PROHIBITIONS WITH RESPECT TO

14 MEMBERS OF THE BOARD OF TRUSTEES.—No

15 member of the Board of Trustees shall—

16 ‘‘(i) deal with the assets of the Trust

17 in the trustee’s own interest or for the

18 trustee’s own account;

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

20 capacity act in any transaction involving

21 the assets of the Trust on behalf of a party

22 (or represent a party) whose interests are

23 adverse to the interests of the Trust, the

24 Railroad Retirement Board, or the inter25 ests 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 IN5 SURANCE.—Any provision in an agreement or

6 instrument that purports to relieve a trustee

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

9 be void: Provided, however, That nothing shall

10 preclude—

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

13 liability or losses occurring by reason of

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

16 against the trustee in the case of a breach

17 of a fiduciary obligation by such trustee;

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

20 from and for his own account; or

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

23 cover potential liability of one or more

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

2 this section.

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

4 person who handles funds or other property of

5 the Trust (hereafter in this subsection referred

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

7 bond shall provide protection to the Trust

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

11 shall be in accordance with the following:

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

13 fixed at the beginning of each fiscal year

14 of the Trust by the Railroad Retirement

15 Board. Such amount shall not be less than

16 10 percent of the amount of the funds

17 handled. In no case shall such bond be less

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

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

22 subject to the 10 per centum limitation of

23 the preceding sentence.

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

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

2 any of the funds or other property of the

3 Trust without being bonded as required by

4 this subsection and it shall be unlawful for

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

7 such functions, to permit such functions,

8 or any of them, to be performed by any

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

11 been met.

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

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

16 whose business operations such person has

17 any control or significant financial interest,

18 direct or indirect.

19 ‘‘(E) AUDIT AND REPORT.—

20 ‘‘(i) The Trust shall annually engage

21 an independent qualified public accountant

22 to audit the financial statements of the

23 Trust.

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

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

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

6 ‘‘(II) a statement of operations;

7 ‘‘(III) a statement of cash flows;

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

10 systems;

11 ‘‘(V) the report resulting from an

12 audit of the financial statements of

13 the Trust conducted under clause (i);

14 and

15 ‘‘(VI) any other comments and

16 information necessary to inform the

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

19 ‘‘(iii) The Trust shall provide the

20 President, the Railroad Retirement Board,

21 and the Director of the Office of Manage22 ment and Budget a copy of the manage23 ment report when it is submitted to Con24 gress.
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1 ‘‘(F) ENFORCEMENT.—The Railroad Re2 tirement Board may bring a civil action—

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

4 the Trust, its Board of Trustees, or its em5 ployees or agents that violates any provi6 sion of this Act; or

7 ‘‘(ii) to obtain other appropriate relief

8 to redress such violations, or to enforce

9 any provisions of this Act.

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

11 The Board of Trustees shall have the authority to

12 make rules to govern its operations, employ profes13 sional staff, and contract with outside advisers, in14 cluding the Railroad Retirement Board, to provide

15 legal, accounting, investment advisory, or other serv16 ices necessary for the proper administration of this

17 subsection. In the case of contracts with investment

18 advisory services, compensation for such services

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

20 other terms and conditions as are customary for

21 such services.

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

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

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

2 a majority vote of the quorum present. All decisions

3 of the Board of Trustees shall be entered upon the

4 records of the Board of Trustees.

5 ‘‘(8) FUNDING.—The expenses of the Trust and

6 the Board of Trustees incurred under this sub7 section shall be paid from the Trust.’’.

8 (b) CONFORMING AND TECHNICAL AMENDMENTS

9 GOVERNING INVESTMENTS.—Section 15(e) of the Rail10 road Retirement Act of 1974 (45 U.S.C. 231n(e)) is

11 amended—

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

13 Benefits Payments Account’’ and all that follows

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

15 and inserting ‘‘and the Dual Benefits Payments Ac16 count as are not transferred to the National Rail17 road Retirement Investment Trust as the Board

18 may determine’’;

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

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

21 and

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

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

24 (c) MEANS OF FINANCING.—For all purposes of the

25 Congressional Budget Act of 1974, the Balanced Budget
26

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1 and Emergency Deficit Control Act of 1985, and chapter

2 11 of title 31, United States Code, and notwithstanding

3 section 20 of the Office of Management and Budget Cir4 cular No. A-11, the purchase or sale of non-Federal assets

5 (other than gains or losses from such transactions) by the

6 National Railroad Retirement Investment Trust shall be

7 treated as a means of financing.

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

9 this section shall take effect on the first day of the month

10 that begins more than 30 days after enactment.

11 SEC. 106. ELIMINATION OF SUPPLEMENTAL ANNUITY AC12 COUNT.

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

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

15 is amended by striking ‘‘payments of supplemental annu16 ities under section 2(b) of this Act shall be made from

17 the Railroad Retirement Supplemental Account, and’’.

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

19 the Railroad Retirement Act of 1974 (45 U.S.C. 231n(c))

20 is repealed.

21 (c) AMENDMENT TO RAILROAD RETIREMENT AC22 COUNT.—Section 15(a) of the Railroad Retirement Act of

23 1974 (45 U.S.C. 231n(a)) is amended by striking ‘‘, ex24 cept those portions of the amounts covered into the Treas-
27

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1 ury under sections 3211(b),’’ and all that follows through

2 the end of the subsection and inserting a period.

3 (d) TRANSFER.—

4 (1) DETERMINATION.—As soon as possible

5 after December 31, 2001, the Railroad Retirement

6 Board shall—

7 (A) determine the amount of funds in the

8 Railroad Retirement Supplemental Account

9 under section 15(c) of the Railroad Retirement

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

11 of such determination; and

12 (B) direct the Secretary of the Treasury to

13 transfer such funds to the National Railroad

14 Retirement Investment Trust under section

15 15(j) of such Act (as added by section 105).

16 (2) TRANSFER BY THE SECRETARY OF THE

17 TREASURY.—The Secretary of the Treasury shall

18 make the transfer described in paragraph (1).

19 (e) EFFECTIVE DATE.—

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

21 the amendments made by subsections (a), (b), and

22 (c) shall take effect January 1, 2002.

23 (2) ACCOUNT IN EXISTENCE UNTIL TRANSFER

24 MADE.—The Railroad Retirement Supplemental Ac25 count under section 15(c) of the Railroad Retire-
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1 ment Act of 1974 (45 U.S.C. 231n(c)) shall con2 tinue to exist until the date that the Secretary of the

3 Treasury makes the transfer described in subsection

4 (d)(2).

5 SEC. 107. TRANSFER AUTHORITY REVISIONS.

6 (a) RAILROAD RETIREMENT ACCOUNT.—Section 15

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

8 is amended by adding after subsection (j) the following

9 new subsection:

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

11 upon establishment of the National Railroad Retirement

12 Investment Trust and from time to time thereafter, direct

13 the Secretary of the Treasury to transfer, in such manner

14 as will maximize the investment returns to the Railroad

15 Retirement system, that portion of the Railroad Retire16 ment Account that is not needed to pay current adminis17 trative expenses of the Board to the National Railroad Re18 tirement Investment Trust. The Secretary shall make that

19 transfer.’’.

20 (b) TRANSFERS FROM THE NATIONAL RAILROAD

21 RETIREMENT INVESTMENT TRUST.—Section 15 of the

22 Railroad Retirement Act of 1974 (45 U.S.C. 231n), as

23 amended by subsection (a), is further amended by adding

24 after subsection (k) the following new subsection:
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1 ‘‘(l) NATIONAL RAILROAD RETIREMENT INVEST2 MENT TRUST.—The National Railroad Retirement Invest3 ment Trust shall from time to time transfer to the dis4 bursing agent described in section 7(b)(4) or as otherwise

5 directed by the Railroad Retirement Board pursuant to

6 section 7(b)(4), such amounts as may be necessary to pay

7 benefits under this Act (other than benefits paid from the

8 Social Security Equivalent Benefit Account or the Dual

9 Benefit Payments Account).’’.

10 (c) SOCIAL SECURITY EQUIVALENT BENEFIT AC11 COUNT.—

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

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

14 231n–1(d)(2)) is amended to read as follows:

15 ‘‘(2) Upon establishment of the National Railroad

16 Retirement Investment Trust and from time to time there17 after, the Board shall direct the Secretary of the Treasury

18 to transfer, in such manner as will maximize the invest19 ment returns to the Railroad Retirement system, the bal20 ance of the Social Security Equivalent Benefit Account

21 not needed to pay current benefits and administrative ex22 penses required to be paid from that Account to the Na23 tional Railroad Retirement Investment Trust, and the

24 Secretary shall make that transfer. Any balance trans25 ferred under this paragraph shall be used by the National
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1 Railroad Retirement Investment Trust only to pay bene2 fits under this Act or to purchase obligations of the United

3 States that are backed by the full faith and credit of the

4 United States pursuant to chapter 31 of title 31, United

5 States Code. The proceeds of sales of, and the interest

6 income from, such obligations shall be used by the Trust

7 only to pay benefits under this Act.’’.

8 (2) TRANSFERS TO DISBURSING AGENT.—Sec9 tion 15A(c)(1) of the Railroad Retirement Act of

10 1974 (45 U.S.C. 231n–1(c)(1)) is amended by add11 ing at the end the following new sentence: ‘‘The Sec12 retary shall from time to time transfer to the dis13 bursing agent under section 7(b)(4) amounts nec14 essary to pay those benefits.’’.

15 (3) CONFORMING AMENDMENT.—Section

16 15A(d)(1) of the Railroad Retirement Act of 1974

17 (45 U.S.C. 231n–1(d)(1)) is amended by striking

18 the second and third sentences.

19 (d) DUAL BENEFITS PAYMENTS ACCOUNT.—Section

20 15(d)(1) of the Railroad Retirement Act of 1974 (45

21 U.S.C. 231n(d)(1)) is amended by adding at the end the

22 following new sentence: ‘‘The Secretary of the Treasury

23 shall from time to time transfer from the Dual Benefits

24 Payments Account to the disbursing agent under section
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1 7(b)(4) amounts necessary to pay benefits payable from

2 that Account.’’.

3 (e) CERTIFICATION BY THE BOARD AND PAY4 MENT.—Paragraph (4) of section 7(b) of the Railroad Re5 tirement Act of 1974 (45 U.S.C. 231f(b)(4)) is amended

6 to read as follows:

7 ‘‘(4)(A) The Railroad Retirement Board, after con8 sultation with the Board of Trustees of the National Rail9 road Retirement Investment Trust and the Secretary of

10 the Treasury, shall enter into an arrangement with a non11 governmental financial institution to serve as disbursing

12 agent for benefits payable under this Act who shall dis13 burse consolidated benefits under this Act to each recipi14 ent. Pending the taking effect of that arrangement, bene15 fits shall be paid as under the law in effect prior to the

16 enactment of the Railroad Retirement and Survivors’ Im17 provement Act of 2001.

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

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

20 amounts required to be transferred from the Social

21 Security Equivalent Benefit Account and the Dual

22 Benefits Payments Account to the disbursing agent

23 to make payments of benefits and the Secretary of

24 the Treasury shall transfer those amounts;
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1 ‘‘(ii) to the Board of Trustees of the National

2 Railroad Retirement Investment Trust the amounts

3 required to be transferred from the National Rail4 road Retirement Investment Trust to the disbursing

5 agent to make payments of benefits and the Board

6 of Trustees shall transfer those amounts; and

7 ‘‘(iii) to the disbursing agent the name and ad8 dress of each individual entitled to receive a pay9 ment, the amount of such payment, and the time at

10 which the payment should be made.’’.

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

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

13 is amended—

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

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

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

17 from the National Railroad Retirement Investment

18 Trust or the Social Security Equivalent Benefit Ac19 count, as the case may be’’; and

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

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

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

23 (g) TRANSITIONAL RULE FOR EXISTING OBLIGA24 TION.—In making transfers under sections 15(k) and

25 15A(d)(2) of the Railroad Retirement Act of 1974, as
33

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1 amended by subsections (a) and (c), respectively, the Rail2 road Retirement Board shall consult with the Secretary

3 of the Treasury to design an appropriate method to trans4 fer obligations held as of the date of enactment of this

5 Act or to convert such obligations to cash at the discretion

6 of the Railroad Retirement Board prior to transfer. The

7 National Railroad Retirement Investment Trust may hold

8 to maturity any obligations so received or may redeem

9 them prior to maturity, as the Trust deems appropriate.

10 SEC. 108. ANNUAL RATIO PROJECTIONS AND CERTIFI11 CATIONS BY THE RAILROAD RETIREMENT

12 BOARD.

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

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

15 amended—

16 (1) by inserting after the first sentence the fol17 lowing new sentence: ‘‘On or before May 1 of each

18 year beginning in 2003, the Railroad Retirement

19 Board shall compute its projection of the account

20 benefits ratio and the average account benefits ratio

21 (as defined by section 3241(c) of the Internal Rev22 enue Code of 1986) for each of the next succeeding

23 five fiscal years.’’; and

24 (2) by striking ‘‘the projection prepared pursu25 ant to the preceding sentence’’ and inserting ‘‘the
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1 projections prepared pursuant to the preceding two

2 sentences’’.

3 (b) CERTIFICATIONS.—The Railroad Retirement Act

4 of 1974 (45 U.S.C. 231 et seq.) is amended by adding

5 at the end the following new section:

6 ‘‘COMPUTATION AND CERTIFICATION OF ACCOUNT

7 BENEFIT RATIOS

8 ‘‘SEC. 23. (a) INITIAL COMPUTATION AND CERTIFI9 CATION.—On or before November 1, 2003, the Railroad

10 Retirement Board shall—

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

12 each of the most recent 10 preceding fiscal years,

13 and

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

15 such fiscal year to the Secretary of the Treasury.

16 ‘‘(b) COMPUTATIONS AND CERTIFICATIONS AFTER

17 2003.—On or before November 1 of each year after 2003,

18 the Railroad Retirement Board shall—

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

20 fiscal year ending in such year, and

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

22 fiscal year to the Secretary of the Treasury.

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

24 ‘account benefits ratio’ has the meaning given that term

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

26 1986.’’.
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1 TITLE II—AMENDMENTS TO THE

2 INTERNAL REVENUE CODE

3 OF 1986

4 SEC. 201. AMENDMENTS TO THE INTERNAL REVENUE CODE

5 OF 1986.

6 Except as otherwise provided, whenever in this title

7 an amendment or repeal is expressed in terms of an

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

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

10 or other provision of the Internal Revenue Code of 1986.

11 SEC. 202. EXEMPTION FROM TAX FOR NATIONAL RAILROAD

12 RETIREMENT INVESTMENT TRUST.

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

14 at the end the following new paragraph:

15 ‘‘(28) The National Railroad Retirement Invest16 ment Trust established under section 15(j) of the

17 Railroad Retirement Act of 1974.’’.

18 SEC. 203. REPEAL OF SUPPLEMENTAL ANNUITY TAX.

19 (a) REPEAL OF TAX ON EMPLOYEE REPRESENTA20 TIVES.—Section 3211 is amended by striking subsection

21 (b).

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

23 is amended by striking subsections (c) and (d) and by re24 designating subsection (e) as subsection (c).
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to calendar years beginning after

3 December 31, 2001.

4 SEC. 204. EMPLOYER, EMPLOYEE REPRESENTATIVE, AND

5 EMPLOYEE TIER 2 TAX RATE ADJUSTMENTS.

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

7 of section 3221 is amended to read as follows:

8 ‘‘(b) TIER 2 TAX.—

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

10 there is hereby imposed on every employer an excise

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

12 equal to the applicable percentage of the compensa13 tion paid during any calendar year by such employer

14 for services rendered to such employer.

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

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

17 means—

18 ‘‘(A) 15.6 percent in the case of compensa19 tion paid during 2002,

20 ‘‘(B) 14.2 percent in the case of compensa21 tion paid during 2003, and

22 ‘‘(C) in the case of compensation paid dur23 ing any calendar year after 2003, the percent24 age determined under section 3241 for such cal25 endar year.’’.
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1 (b) RATE OF TAX ON EMPLOYEE REPRESENTA2 TIVES.—Section 3211, as amended by section 203, is

3 amended by striking subsection (a) and inserting the fol4 lowing new subsections:

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

6 is hereby imposed on the income of each employee rep7 resentative a tax equal to the applicable percentage of the

8 compensation received during any calendar year by such

9 employee representative for services rendered by such em10 ployee representative. For purposes of the preceding sen11 tence, the term ‘applicable percentage’ means the percent12 age equal to the sum of the rates of tax in effect under

13 subsections (a) and (b) of section 3101 and subsections

14 (a) and (b) of section 3111 for the calendar year.

15 ‘‘(b) TIER 2 TAX.—

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

17 there is hereby imposed on the income of each em18 ployee representative a tax equal to the applicable

19 percentage of the compensation received during any

20 calendar year by such employee representatives for

21 services rendered by such employee representative.

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

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

24 means—
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1 ‘‘(A) 14.75 percent in the case of com2 pensation received during 2002,

3 ‘‘(B) 14.20 percent in the case of com4 pensation received during 2003, and

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

6 during any calendar year after 2003, the per7 centage determined under section 3241 for such

8 calendar year.

9 ‘‘(c) CROSS REFERENCE.—

‘‘For application of different contribution bases

with respect to the taxes imposed by subsections (a)

and (b), see section 3231(e)(2).’’.

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

11 of section 3201 is amended to read as follows:

12 ‘‘(b) TIER 2 TAX.—

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

14 there is hereby imposed on the income of each em15 ployee a tax equal to the applicable percentage of

16 the compensation received during any calendar year

17 by such employee for services rendered by such em18 ployee.

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

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

21 means—

22 ‘‘(A) 4.90 percent in the case of compensa23 tion received during 2002 or 2003, and
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1 ‘‘(B) in the case of compensation received

2 during any calendar year after 2003, the per3 centage determined under section 3241 for such

4 calendar year.’’.

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

6 amended by adding at the end the following new sub7 chapter:

8 ‘‘Subchapter E—Tier 2 Tax Rate

9 Determination

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

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

11 ON AVERAGE ACCOUNT BENEFITS RATIO.

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

13 3201(b), 3211(b), and 3221(b), the applicable percentage

14 for any calendar year is the percentage determined in ac15 cordance with the table in subsection (b).

16 ‘‘(b) TAX RATE SCHEDULE.—

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

3221(b)

Applicable percentage for section

At least But less than 3201(b)

2.5 22.1 4.9

2.5 3.0 18.1 4.9

3.0 3.5 15.1 4.9

3.5 4.0 14.1 4.9

4.0 6.1 13.1 4.9

6.1 6.5 12.6 4.4

6.5 7.0 12.1 3.9

7.0 7.5 11.6 3.4

7.5 8.0 11.1 2.9

8.0 8.5 10.1 1.9

8.5 9.0 9.1 0.9

9.0 8.2 0
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1 ‘‘(c) DEFINITIONS RELATED TO DETERMINATION OF

2 RATES OF TAX.—

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

4 For purposes of this section, the term ‘average ac5 count benefits ratio’ means, with respect to any cal6 endar year, the average determined by the Secretary

7 of the account benefits ratios for the 10 most recent

8 fiscal years ending before such calendar year. If the

9 amount determined under the preceding sentence is

10 not a multiple of 0.1, such amount shall be in11 creased to the next highest multiple of 0.1.

12 ‘‘(2) ACCOUNT BENEFITS RATIO.—For pur13 poses of this section, the term ‘account benefits

14 ratio’ means, with respect to any fiscal year, the

15 amount determined by the Railroad Retirement

16 Board by dividing the fair market value of the assets

17 in the Railroad Retirement Account and of the Na18 tional Railroad Retirement Investment Trust (and

19 for years before 2002, the Social Security Equiva20 lent Benefits Account) as of the close of such fiscal

21 year by the total benefits and administrative ex22 penses paid from the Railroad Retirement Account
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1 and the National Railroad Retirement Investment

2 Trust during such fiscal year.

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

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

5 Federal Register of the rates of tax determined under this

6 section which are applicable for the following calendar

7 year.’’.

8 (e) CONFORMING AMENDMENTS.—

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

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

11 3211(a)’’.

12 (2) Section 72(r)(2)(B)(i) is amended by strik13 ing ‘‘3211(a)(2)’’ and inserting ‘‘3211(b)’’.

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

15 section 3231(e) are amended by striking

16 ‘‘3211(a)(1)’’ and inserting ‘‘3211(a)’’.

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

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

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

20 amended by adding at the end the following new

21 item:

‘‘Subchapter E. Tier 2 tax rate determination.’’.
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1 (f) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to calendar years beginning after

3 December 31, 2001.

Passed the House of Representatives July 31, 2001.

Attest: JEFF TRANDAHL,

Clerk.