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[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 180 Introduced in House (IH)]

107th CONGRESS
  1st Session
                                H. R. 180

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

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                            January 3, 2001

 Mr. Shuster introduced the following bill; which was referred to the 
Committee on Transportation and Infrastructure, and in addition to the 
Committee on Ways and Means, for a period to be subsequently determined 
 by the Speaker, in each case for consideration of such provisions as 
        fall within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL

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

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Railroad 
Retirement and Survivors' Improvement Act of 2001''.
    (b) Table of Contents.--The table of contents for 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.

         TITLE I--AMENDMENTS TO RAILROAD RETIREMENT ACT OF 1974

SEC. 101. EXPANSION OF WIDOW'S AND WIDOWER'S BENEFITS.

    (a) In General.--Section 4(g) of the Railroad Retirement Act of 
1974 is amended by adding at the end the following new subdivision:
    ``(10)(i) If for any month the unreduced annuity provided under 
this section for a widow or widower is less than the widow's or 
widower's initial minimum amount computed pursuant to paragraph (ii) of 
this subdivision, the unreduced annuity shall be increased to that 
initial minimum amount. For the purposes of this subdivision, the 
unreduced annuity is the annuity without regard to any deduction on 
account of work, without regard to any reduction for entitlement to an 
annuity under section 2(a)(1) of this Act, without regard to any 
reduction for entitlement to a benefit under title II of the Social 
Security Act, and without regard to any reduction for entitlement to a 
public service pension pursuant to sections 202(e)(7), 202(f)(2), or 
section 202(g)(4) of the Social Security Act.
    ``(ii) For the purposes of this subdivision, the widow or widower's 
initial minimum amount is the amount of the unreduced annuity computed 
at the time an annuity is awarded to that widow or widower, except 
that--
            ``(A) in subsection (g)(1)(i) `100 per centum' shall be 
        substituted for `50 per centum'; and
            ``(B) in subsection (g)(2)(ii) `130 per centum' shall be 
        substituted for `80 per centum' both places it appears.
    ``(iii) If a widow or widower who was previously entitled to a 
widow's or widower's annuity under section 2(d)(1)(ii) of this Act 
becomes entitled to a widow's or widow's annuity under section 
2(d)(1)(i) of this Act, a new initial minimum amount shall be computed 
at the time of award of the widow's or widower's annuity under section 
2(d)(1)(i) of this Act.''.
    (b) Effective Date.--
            (1) Generally.--The amendment made by this section shall 
        take effect January 1, 2001 and shall apply to annuity amounts 
        accruing for months after December 2000 in the case of 
        annuities awarded on or after that date and in the case of 
        annuities awarded before that date if the annuity amount under 
        section 4(g) of the Railroad Retirement Act was computed under 
        section 4(g), as amended by Public Law 97-35.
            (2) Special rule for annuities awarded before january 1, 
        2001.--In applying the amendments made by this section to 
        annuities awarded before January 1, 2001, the calculation of 
        the initial minimum amount under new section 4(g)(10)(ii) of 
        the Act shall be made as of the date of award of the widow's or 
        widower's annuity.

SEC. 102. RETIREMENT AGE RESTORATION.

    (a) Employee Annuities.--Section 3(a)(2) of the Railroad Retirement 
Act of 1974 is amended by inserting after ``(2)'' the following: ``For 
purposes of this subsection, individuals entitled to an annuity under 
section 2(a)(1)(ii) of this Act shall, except for the purposes of 
recomputations in accordance with section 215(f) of the Social Security 
Act, be deemed to have attained retirement age (as defined by section 
216(l) of the Social Security Act).''.
    (b) Spouse and Survivor Annuities.--Section 4(a)(2) of the Railroad 
Retirement Act of 1974 is amended by striking ``if an'' and all that 
follows through ``section 2(c)(1) of this Act'' and inserting ``a 
spouse entitled to an annuity under section 2(c)(1)(ii)(B) of this 
Act''.
    (c) Conforming Repeals.--Sections 3(a)(3), 4(a)(3), and 4(a)(4) of 
the Railroad Retirement Act are repealed.
    (d) Effective Dates.--
            (1) Generally.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to annuities that 
        begin to accrue on or after January 1, 2001.
            (2) Exception.--The amount of the annuity provided for a 
        spouse under section 4(a) shall be computed under section 
        4(a)(3), as in effect before the date of the enactment of this 
        section, if the annuity amount provided under section 3(a) for 
        the individual on whose employment record the spouse annuity is 
        based was computed under section 3(a)(3), as in effect before 
the date of the enactment of this section.

SEC. 103. VESTING REQUIREMENT.

    (a) Certain Annuities for Individuals.--Section 2(a) of the 
Railroad Retirement Act of 1974 is amended--
            (1) by inserting in subdivision (1) ``or, for purposes of 
        paragraphs (i), (iii), and (v), five years of service, all of 
        which accrues after December 31, 1995,'' after ``ten years of 
        service''; and
            (2) by adding at the end the following:
    ``(4) An individual who is entitled to an annuity under paragraph 
(v) of subdivision (1), but who does not have at least ten years of 
service, shall, prior to the month in which the individual attains age 
62, be entitled only to an annuity amount computed under section 3(a) 
of this Act (without regard to section 3(a)(2) of this Act) or section 
3(f)(3) of this Act. Upon attainment of age 62, such an individual may 
also be entitled to an annuity amount computed under section 3(b), but 
such annuity amount shall be reduced for early retirement in the same 
manner as if the individual were entitled to an annuity under section 
2(a)(1)(iii).''.
    (b) Computation Rule for Individuals' Annuities.--Section 3(a) of 
the Railroad Retirement Act of 1974, as amended by section 102 of this 
Act, is further amended by adding at the end the following new 
subdivision:
    ``(3) If an individual entitled to an annuity under section 
2(a)(1)(i) or (iii) of this Act on the basis of less than ten years of 
service is entitled to a benefit under section 202(a), section 202(b), 
or section 202(c) of the Social Security Act which began to accrue 
before the annuity under section 2(a)(1)(i) or (iii) of this Act, the 
annuity amount provided such individual under this subsection, shall be 
computed as though the annuity under this Act began to accrue on the 
later of (A) the date on which the benefit under section 202(a), 
section 202(b), or section 202(c) of the Social Security Act began or 
(B) the date on which the individual first met the conditions for 
entitlement to an age reduced annuity under this Act other than the 
conditions set forth in sections 2(e)(1) and 2(e)(2) of this Act and 
the requirement that an application be filed.''.
    (c) Survivors' Annuities.--Section 2(d)(1) of the Railroad 
Retirement Act of 1974 is amended by inserting ``or five years of 
service, all of which accrues after December 31, 1995,'' after ``ten 
years of service''.
    (d) Limitation on Annuity Amounts.--Section 2 of the Railroad 
Retirement Act of 1974 is amended by adding at the end the following:
    ``(i) An individual entitled to an annuity under this section who 
has completed five years of service, all of which accrues after 1995, 
but who has not completed ten years of service, and the spouse, 
divorced spouse, and survivors of such individual, shall not be 
entitled to an annuity amount provided under section 3(a), section 
4(a), or section 4(f) of this Act unless the individual, or the 
individual's spouse, divorced spouse, or survivors, would be entitled 
to a benefit under the Social Security Act on the basis of the 
individual's employment record under both the Railroad Retirement Act 
and the Social Security Act.''.
    (e) Computation Rule for Spouses' Annuities.--Section 4(a) of the 
Railroad Retirement Act of 1974, as amended by section 102 of this Act, 
is further amended by adding at the end the following new subdivision:
    ``(3) If a spouse entitled to an annuity under section 
2(c)(1)(ii)(A), section 2(c)(1)(ii)(C), or section 2(c)(2) of this Act 
or a divorced spouse entitled to an annuity under section 2(c)(4) of 
this Act on the basis of the employment record of an employee who will 
have completed less than 10 years of service is entitled to a benefit 
under section 202(a), section 202(b), or section 202(c) of the Social 
Security Act which began to accrue before the annuity under section 
2(c)(1)(ii)(A), section 2(c)(1)(ii)(C), section 2(c)(2), or section 
2(c)(4) of this Act, the annuity amount provided under this subsection 
shall be computed as though the annuity under this Act began to accrue 
on the later of (A) the date on which the benefit under section 202(a), 
section 202(b), or section 202(c) of the Social Security Act began or 
(B) the first date on which the annuitant met the conditions for 
entitlement to an age reduced annuity under this Act other than the 
conditions set forth in sections 2(e)(1) and 2(e)(2) of this Act and 
the requirement that an application be filed.''.
    (f)  Application Deeming Provision.--Section 5(b) of the Railroad 
Retirement Act of 1974 is amended by striking the second sentence and 
inserting the following: ``An application filed with the Board for an 
employee annuity, spouse annuity, or divorced spouse annuity on the 
basis of the employment record of an employee who will have completed 
less than ten years of service shall be deemed to be an application for 
any benefit to which such applicant may be entitled under this Act or 
section 202(a), section 202(b), or section 202(c) of the Social 
Security Act. An application filed with the Board for an annuity on the 
basis of the employment record of an employee who will have completed 
ten years of service shall, unless the applicant specified otherwise, 
be deemed to be an application for any benefit to which such applicant 
may be entitled under this Act or title II of the Social Security 
Act.''.
    (g) Crediting Service Under the Social Security Act.--Section 18(2) 
of the Railroad Retirement Act of 1974 is amended--
            (1) by inserting ``or less than five years of service, all 
        of which accrues after December 31, 1995,'' after ``ten years 
        of service'' every place it occurs; and
            (2) by inserting ``or five or more years of service, all of 
        which accrues after December 31, 1995,'' after ``ten or more 
        years of service''.
    (h) Automatic Benefit Eligibility Adjustments.--Section 19 of 
Railroad Retirement Act of 1974 is amended--
            (1) by inserting ``or five or more years of service, all of 
        which accrues after December 31, 1995,'' after ``ten years of 
        service'' in subsection (c); and
            (2) by inserting ``or five or more years of service, all of 
        which accrues after December 31, 1995,'' after ``ten years of 
        service'' in subsection (d)(2).
    (i) Conforming Amendments.--
            (1) Section 6(e)(1) of the Railroad Retirement Act of 1974 
        is amended by inserting ``or five or more years of service, all 
of which accrues after December 31, 1995,'' after ``ten years of 
service''.
            (2) Section 7(b)(2) of the Railroad Retirement Act of 1974 
        is amended by inserting ``or five or more years of service, all 
        of which accrues after December 31, 1995,'' after ``ten years 
        of service''.
            (3) Section 205(i) of the Social Security Act is amended by 
        inserting ``or five or more years of service, all of which 
        accrues after December 31, 1995,'' after ``ten years of 
        service''.
    (j) Effective Date.--The amendments made by this section shall take 
effect January 1, 2001.

SEC. 104. REPEAL OF RAILROAD RETIREMENT MAXIMUM.

    (a) Employee Annuities.--Section 3(f) of the Railroad Retirement 
Act of 1974 is amended by striking paragraph (1).
    (b) Spouse and Survivor Annuities.--Section 4 of the Railroad 
Retirement Act of 1974 is amended by striking subsection (c).
    (c) Effective Date.--The amendments made by this section shall be 
effective January 1, 2001, and shall apply to annuity amounts accruing 
for months after December 2000.

SEC. 105. INVESTMENT OF RAILROAD RETIREMENT ASSETS.

    (a) Establishment of Railroad Retirement Investment Trust.--Section 
15 of the Railroad Retirement Act of 1974 is amended by inserting after 
subsection (i) the following:
    ``(j) Railroad Retirement Investment Trust.--
            ``(1) Establishment.--The Railroad Retirement Investment 
        Trust (hereinafter in this subsection referred to as the 
        `Trust') is hereby established. The Trust shall manage and 
        invest the assets of the Railroad Retirement Trust Fund 
        (hereinafter in this section referred to as the ``Fund'', which 
        is hereby established as a trust organized in the District of 
        Columbia and shall, to the extent not inconsistent with this 
        Act, be subject to the laws of the District of Columbia 
        applicable to such trusts.
            ``(2) Not a federal agency or instrumentality.--The Trust 
        is not a department, agency, or instrumentality of the 
        Government of the United States and shall not be subject to 
        title 31, United States Code.
            ``(3) Board of trustees.--
                    ``(A) Generally.--The Trust shall have a Board of 
                Trustees, consisting of seven members, each appointed 
                by a unanimous vote of the Railroad Retirement Board. 
                The Railroad Retirement Board may remove any member so 
                appointed by unanimous vote. Of the seven members, 
                three shall represent the interests of labor, three 
                shall represent the interests of management, and one 
                shall represent the interests of the general public. 
                The members of the Board of Trustees shall not be 
                considered officers or employees of the Government of 
                the United States.
                    ``(B) Qualifications.--Members of the Board of 
                Trustees shall be appointed only from among persons who 
                have experience and expertise in the management of 
                financial investments and pension plans. No member of 
                the Railroad Retirement Board shall be eligible to be a 
                member of the Board of Trustees.
                    ``(C) Terms.--Except as provided in this 
                subparagraph, each member shall be appointed for a 3-
                year term. The initial members appointed under this 
                paragraph shall be divided into three equal groups so 
                nearly as may be, of which one group will be appointed 
                for a 1-year term, one for a 2-year term, and one for a 
                3-year term. A vacancy in the Board of Trustees shall 
                not affect the powers of the Board of Trustees and 
                shall be filled in the same manner as the selection of 
                the member whose departure caused the vacancy. Upon the 
                expiration of a term of a member of the Board of 
                Trustees, that member shall continue to serve until a 
                successor is appointed.
            ``(4) Powers of the board of trustees.--The Board of 
        Trustees shall--
                    ``(A) retain independent advisers to assist it in 
                the formulation and adoption of its investment 
                guidelines;
                    ``(B) retain independent investment managers to 
                invest the assets of the Fund in a manner consistent 
                with such investment guidelines;
                    ``(C) invest assets in the Fund, pursuant to the 
                policies adopted in subparagraph (A);
                    ``(D) pay administrative expenses of the Fund and 
                the Trust from the money in the Fund; and
                    ``(E) transfer money to the disbursing agent to pay 
                benefits payable under this Act from money in the Fund 
                and administrative expenses related to those benefits.
            ``(5) Reporting requirements and fiduciary standards.--The 
        following reporting requirements and fiduciary standards shall 
        apply with respect to the Railroad Retirement Trust and the 
        Railroad Retirement Trust Fund (and the assets held in such 
        Trust Fund):
                    ``(A) Duties of the board of trustees.--The 
                Railroad Retirement Trust and each member of the Board 
                of Trustees shall discharge their duties with respect 
                to the assets of the Fund solely in the interest of the 
                Railroad Retirement Board and through it, the 
                participants and beneficiaries of the programs funded 
                under this Act--
                            ``(i) for the exclusive purpose of--
                                    ``(I) providing benefits to 
                                participants and their beneficiaries; 
                                and
                                    ``(II) defraying reasonable 
                                expenses of administering the functions 
                                of the Trust;
                            ``(ii) with the care, skill, prudence, and 
                        diligence under the circumstances then 
                        prevailing that a prudent person acting in a 
                        like capacity and familiar with such matters 
                        would use in the conduct of an enterprise of a 
                        like character and with like aims;
                            ``(iii) by diversifying investments so as 
                        to minimize the risk of large losses, unless 
                        under the circumstances it is clearly prudent 
                        not to do so; and
                            ``(iv) in accordance with Trust governing 
                        documents and instruments insofar as such 
                        documents and instruments are consistent with 
                        this Act.
                    ``(B) Prohibitions with respect to members of the 
                board of trustees.--No member of the Board of Trustees 
                shall--
                            ``(i) deal with the assets of the Fund in 
                        the trustee's own interest or for the trustee's 
                        own account;
                            ``(ii) in an individual or in any other 
                        capacity act in any transaction involving the 
                        assets of the Fund on behalf of a party (or 
                        represent a party) whose interests are adverse 
                        to the interests of the Trust, the Fund, the 
                        Railroad Retirement Board, or the interests of 
                        participants or beneficiaries; or
                            ``(iii) receive any consideration for the 
                        trustee's own personal account from any party 
                        dealing with the assets of the Fund.
                    ``(C) Exculpatory provisions and insurance.--Any 
                provision in an agreement or instrument that purports 
                to relieve a trustee from responsibility or liability 
                for any responsibility, obligation or duty under this 
                Act shall be void: Provided, however, That nothing 
                shall preclude--
                            ``(i) the Trust from purchasing insurance 
                        for its trustees or for itself to cover 
                        liability or losses occurring by reason of the 
                        act or omission of a trustee, if such insurance 
                        permits recourse by the insurer against the 
                        trustee in the case of a breach of a fiduciary 
                        obligation by such trustee;
                            ``(ii) a trustee from purchasing insurance 
                        to cover liability under this section from and 
                        for his own account; or
                            ``(iii) an employer or an employee 
                        organization from purchasing insurance to cover 
                        potential liability of one or more trustees 
                        with respect to their fiduciary 
                        responsibilities, obligations, and duties under 
                        this section.
                    ``(D) Bonding.--Every trustee and every person who 
                handles funds or other property of the Fund (hereafter 
                in this subsection referred to as `Trust official') 
                shall be bonded. Such bond shall provide protection to 
                the Fund against loss by reason of acts of fraud or 
                dishonesty on the part of any Trust official, directly 
                or through the connivance of others, and shall be in 
                accordance with the following:
                            ``(i) The amount of such bond shall be 
                        fixed at the beginning of each fiscal year of 
                        the Trust by the Railroad Retirement Board. 
                        Such amount shall not be less than 10 percent 
                        of the amount of the funds handled. In no case 
                        shall such bond be less than $1,000 nor more 
                        than $500,000, except that the Railroad 
                        Retirement Board, after consideration of the 
                        record, may prescribe an amount in excess of 
                        $500,000, subject to the 10 per centum 
                        limitation of the preceding sentence.
                            ``(ii) It shall be unlawful for any Trust 
                        official to receive, handle, disburse, or 
                        otherwise exercise custody or control of any of 
                        the funds or other property of the Fund without 
                        being bonded as required by this subsection and 
                        it shall be unlawful for any Trust official, or 
                        any other person having authority to direct the 
                        performance of such functions, to permit such 
                        functions, or any of them, to be performed by 
                        any Trust official, with respect to whom the 
                        requirements this subsection have not been met.
                            ``(iii) It shall be unlawful for any person 
                        to procure any bond required by this subsection 
                        from any surety or other company or through any 
                        agent or broker in whose business operations 
                        such person has any control or significant 
                        financial interest, direct or indirect.
                    ``(E) Audit and report.--
                            ``(i) The Trust shall annually engage an 
                        independent qualified public accountant to 
                        audit the financial statements of the Fund.
                            ``(ii) The Trust shall submit an annual 
                        management report to the Congress not later 
than 180 days after the end of the Trust's fiscal year. A management 
report under this subsection shall include--
                                    ``(I) a statement of financial 
                                position;
                                    ``(II) a statement of operations;
                                    ``(III) a statement of cash flows;
                                    ``(IV) a statement on internal 
                                accounting and administrative control 
                                systems;
                                    ``(V) the report resulting from an 
                                audit of the financial statements of 
                                the Trust conducted under subparagraph 
                                (E)(i); and
                                    ``(VI) any other comments and 
                                information necessary to inform the 
                                Congress about the operations and 
                                financial condition of the Trust and 
                                the Fund.
                            ``(iii) The Trust shall provide the 
                        President, the Railroad Retirement Board, and 
                        the Director of the Office of Management and 
                        Budget a copy of the management report when it 
                        is submitted to Congress.
                    ``(F) Enforcement.--The Railroad Retirement Board 
                may bring a civil action--
                            ``(i) to enjoin any act or practice by the 
                        Railroad Retirement Investment Trust, its Board 
                        of Trustees or its employees or agents that 
                        violates any provision of this Act; or
                            ``(ii) to obtain other appropriate relief 
                        to redress such violations, or to enforce any 
                        provisions of this Act.
            ``(6) Rules and administrative powers.--The Board of 
        Trustees shall have the authority to make rules to govern its 
        operations, employ professional staff, and contract with 
        outside advisers to provide legal, accounting, investment 
        advisory or other services necessary for the proper 
        administration of this subsection. In the case of contracts 
        with investment advisory services, compensation for such 
        services may be on a fixed contract fee basis or on such other 
        terms and conditions as are customary for such services.
            ``(7) Quorum.--Five members of the Board of Trustees 
        constitute a quorum to do business. Investment guidelines must 
        be adopted by a unanimous vote of the entire Board of Trustees. 
        All other decisions of the Board of Trustees shall be decided 
        by a majority vote of the quorum present. All decisions of the 
        Board of Trustees shall be entered upon the records of the 
        Board of Trustees.''.
    (b) Conforming and Technical Amendments Governing Investments.--
Subsection 15(e) of the Railroad Retirement Act of 1974 is amended--
            (1) beginning in the first sentence, by striking ``, the 
        Dual Benefits Payments Account'' and all that follows through 
        ``may be made only'' in the second sentence and inserting ``and 
        the Dual Benefits Payments Account as are not transferred to 
        the Railroad Retirement Investment Trust as the Board may 
        determine'';
            (2) by striking ``the Second Liberty Bond Act, as amended'' 
        and inserting ``chapter 31 of title 31''; and
            (3) by striking ``the foregoing requirements'' and 
        inserting ``the requirements of this subsection''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this section.

SEC. 106. ELIMINATION OF SUPPLEMENTAL ANNUITY ACCOUNT.

    (a) Source of Payments.--Section 7(c)(1) of the Railroad Retirement 
Act of 1974 is amended by striking ``payments of supplemental annuities 
under section 2(b) of this Act shall be made from the Railroad 
Retirement Supplemental Account, and''.
    (b) Elimination of Account.--Section 15(c) of the Railroad 
Retirement Act of 1974 is repealed.
    (c) In General.--Section 15(a) of the Railroad Retirement Act of 
1974 is amended by striking ``, except those portions of the amounts 
covered into the Treasury under sections 3211(b),'' and all that 
follows through the end of the subsection and inserting a period.
    (d) Effective Date.--The amendments made by this section shall take 
effect January 1, 2001, except that the Railroad Retirement 
Supplemental Account shall continue to exist until the transfer 
authorized by the following sentence occurs. As soon as possible after 
December 31, 2000, the Board shall determine the balance in the 
Railroad Retirement Supplemental Account and shall direct the Secretary 
of the Treasury to transfer such amount to the Railroad Retirement 
Trust Fund and the Secretary shall make such transfer.

SEC. 107. TRANSFER AUTHORITY REVISIONS.

    (a) Railroad Retirement Account.--Section 15 of the Railroad 
Retirement Act of 1974 is amended by adding after subsection (j) the 
following:
    ``(k) Transfers to the Fund.--The Board shall, upon establishment 
of the Railroad Retirement Trust Fund and from time to time thereafter, 
direct the Secretary of the Treasury to transfer, in such manner as 
will maximize the investment returns to the Railroad Retirement system, 
that portion of the Railroad Retirement Account that is not needed to 
pay current administrative expenses of the Board to the Railroad 
Retirement Trust Fund. The Secretary shall make that transfer.''.
    (b) Railroad Retirement Trust Fund.--Section 15 of the Railroad 
Retirement Act of 1974, as amended by subsection (a), is further 
amended by adding after subsection (k) the following:
    ``(l) Railroad Retirement Trust Fund.--The Railroad Retirement 
Trust shall from time to time transfer to the disbursing agent 
described in section 7(b)(4) such amounts as may be necessary to pay 
benefits under this Act (other than benefits paid from the Social 
Security Equivalent Benefit Account or the Dual Benefit Payments 
Account).''.
    (c) Social Security Equivalent Benefit Account.--Section 15A(d)(2) 
of the Railroad Retirement Act of 1974 is amended to read as follows:
    ``(2) Upon establishment of the Railroad Retirement Trust Fund and 
from time to time thereafter, the Board shall direct the Secretary of 
the Treasury to transfer, in such manner as will maximize the 
investment returns to the Railroad Retirement system, the balance of 
the Social Security Equivalent Benefit Account not needed to pay 
current benefits required to be paid from that Account to the Railroad 
Retirement Trust Fund, and the Secretary shall make that transfer. Any 
balance transferred under this paragraph shall be used by the Railroad 
Retirement Trust only to pay benefits under this Act or to purchase 
obligations of the United States that are backed by the full faith and 
credit of the United States pursuant to chapter 31 of title 31, United 
States Code. The proceeds of sales of, and the interest income from, 
such obligations shall be used by the Trust only to pay benefits under 
this Act.''.
            (2) Transfers to disbursing agent.--Section 15A(c)(1) of 
        the Railroad Retirement Act of 1974 is amended by adding at the 
        end the following: ``The Secretary shall from time to time 
        transfer to the disbursing agent under section 7(b)(4) amounts 
        necessary to pay those benefits.''.
            (3) Conforming amendment.--Section 15A(d)(1) of the 
        Railroad Retirement Act of 1974 is amended by striking the 
        second and third sentences.
    (d) Dual Benefits Payments Account.--Section 15(d)(1) of the 
Railroad Retirement Act of 1974 is amended by adding at the end the 
following: ``The Secretary of the Treasury shall from time to time 
transfer from the Dual Benefits Payments Account to the disbursing 
agent under section 7(b)(4) amounts necessary to pay benefits payable 
from that Account.''.
    (e) Certification by the Board and Payment.--Paragraph (4) of 
section 7(b) of the Railroad Retirement Act of 1974 is amended to read 
as follows:
    ``(4)(A) The Railroad Retirement Board, after consultation with the 
Board of Trustees of the Railroad Retirement Trust and the Secretary of 
the Treasury, shall enter into an arrangement with a nongovernmental 
financial institution to serve as disbursing agent for benefits payable 
under this Act who shall disburse consolidated benefits under this Act 
to each recipient.
    ``(B) The Board shall from time to time certify--
            ``(i) to the Secretary of the Treasury the amounts required 
        to be transferred from the Social Security Equivalent Benefit 
        Account and the the Dual Benefits Payments Account to the 
        disbursing agent to make payments of benefits and the Secretary 
        of the Treasury shall transfer those amounts;
            ``(ii) to the Board of Trustees of the Railroad Retirement 
        Investment Trust the amounts required to be transferred from 
        the Railroad Retirement Investment Trust to the disbursing 
        agent to make payments of benefits and the Board of Trustees 
        shall transfer those amounts; and
            ``(iii) to the disbursing agent the name and address of 
        each individual entitled to receive a payment, the amount of 
        such payment, and the time at which the payment should be 
        made.''.
    (f) Benefit Payments.--Section 7(c)(1) of the Railroad Retirement 
Act of 1974 is amended--
            (1) by striking ``from the Railroad Retirement Account'' 
        and inserting ``by the disbursing agent under subsection (b)(4) 
        from money transferred to it from the Railroad Retirement Trust 
        Fund or the Social Security Equivalent Benefit Account, as the 
        case may be''; and
            (2) by inserting ``by the disbursing agent under subsection 
        (b)(4) from money transferred to it'' after ``Public Law 93-445 
        shall be made''.
    (g) Transitional Rule for Existing Obligation.--In making transfers 
under subsections (a) and (c), the Board shall consult with the 
Secretary of the Treasury to design an appropriate method to transfer 
obligations held as of the date of the enactment or to convert such 
obligations to cash prior to transfer. The Railroad Retirement Trust 
may hold to maturity any obligations so received or may redeem them 
prior to maturity, as the Trust deems appropriate.

SEC. 108. ANNUAL RATIO PROJECTIONS AND CERTIFICATIONS BY THE RAILROAD 
              RETIREMENT BOARD.

    (a) Projections.--Section 22(a)(1) of the Railroad Retirement Act 
of 1974 is amended--
            (1) by adding the following sentence after the first 
        sentence: ``On or before May 1 of each year beginning in 2002, 
        the Railroad Retirement Board shall compute its projection of 
        the account benefits ratio and the average account benefits 
        ratio (as defined by section 3241(c) of the Internal Revenue 
        Code of 1986) for each of the next succeeding five fiscal 
        years.''; and
            (2) by striking ``the projection prepared pursuant to the 
        preceding sentence'' and inserting ``the projections prepared 
        pursuant to the preceding two sentences''.
    (b) Certifications.--The Railroad Retirement Act of 1974 is amended 
by adding at the end the following:

       ``computation and certification of account benefit ratios

    ``Sec. 23. (a) On or before November 1, 2002, the Railroad 
Retirement Board shall--
            ``(1) compute the account benefits ratios for each of the 
        most recent 10 preceding fiscal years, and
            ``(2) certify the account benefits ratios for each such 
        fiscal year to the Secretary.
    ``(b) On or before November 1 of each year after 2002, the Railroad 
Retirement Board shall--
            ``(1) compute the account benefits ratio for the fiscal 
        year ending in such year, and
            ``(2) certify the account benefits ratio for such fiscal 
        year to the Secretary.
    ``(c) Definition.--As used in this section, the term `account 
benefit ratio' has the meaning given that term in section 3241(c) of 
the Internal Revenue Code of 1986.''.

       TITLE II--AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986

SEC. 201. AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986.

    Except as otherwise provided, whenever in this title an amendment 
or repeal is expressed in terms of an amendment to, or repeal of, a 
section or other provision, the reference shall be considered to be 
made to a section or other provision of the Internal Revenue Code of 
1986.

SEC. 202. EXEMPTION FROM TAX FOR RAILROAD RETIREMENT INVESTMENT TRUST.

    Subsection (c) of section 501 is amended by adding at the end the 
following new paragraph:
            ``(28) The Railroad Retirement Investment Trust established 
        under section 15(j) of the Railroad Retirement Act of 1974.''.

SEC. 203. REPEAL OF SUPPLEMENTAL ANNUITY TAX.

    (a) Repeal of Tax on Employee Representatives.--Section 3211 is 
amended by striking subsection (b).
    (b) Repeal of Tax on Employers.--Section 3221 is amended by 
striking subsections (c) and (d).
    (c) Effective Date.--The amendments made by this section shall 
apply to calendar years beginning after December 31, 2000.

SEC. 204. EMPLOYER, EMPLOYEE REPRESENTATIVE, AND EMPLOYEE TIER 2 TAX 
              RATE ADJUSTMENTS.

    (a) Rate of Tax on Employers.--Subsection (b) of section 3221 is 
amended to read as follows:
    ``(b) Tier 2 Tax.--
            ``(1) In general.--In addition to other taxes, there is 
        hereby imposed on every employer an excise tax, with respect to 
        having individuals in his employ, equal to the applicable 
        percentage of the compensation paid during any calendar year by 
        such employer for services rendered to such employer.
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1), the term `applicable percentage' means--
                    ``(A) 15.6 percent in the case of compensation paid 
                during 2001,
                    ``(B) 14.2 percent in the case of compensation paid 
                during 2002, and
                    ``(C) in the case of compensation paid during any 
                calendar year after 2002, the percentage determined 
                under section 3241 for such calendar year.''.
    (b) Rate of Tax on Employee Representatives.--Section 3211, as 
amended by section 203, is amended by striking subsection (a) and 
inserting the following new subsections:
    ``(a) Tier 1 Tax.--In addition to other taxes, there is hereby 
imposed on the income of each employee representative a tax equal to 
the applicable percentage of the compensation received during any 
calendar year by such employee representative for services rendered by 
such employee representative. For purposes of the preceding sentence, 
the term `applicable percentage' means the percentage equal to the sum 
of the rates of tax in effect under subsections (a) and (b) of section 
3101 and subsections (a) and (b) of section 3111 for the calendar year.
    ``(b) Tier 2 Tax.--
            ``(1) In general.--In addition to other taxes, there is 
        hereby imposed on the income of each employee representative a 
        tax equal to the applicable percentage of the compensation 
        received during any calendar year by such employee 
        representatives for services rendered by such employee 
        representative.
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1), the term `applicable percentage' means--
                    ``(A) 14.75 percent in the case of compensation 
                received during 2001,
                    ``(B) 14.20 percent in the case of compensation 
                received during 2002, and
                    ``(C) in the case of compensation received during 
                any calendar year after 2002, the percentage determined 
                under section 3241 for such calendar year.
    ``(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).''.
    (c) Rate of Tax on Employees.--Subsection (b) of section 3201 is 
amended to read as follows:
    ``(b) Tier 2 Tax.--
            ``(1) In general.--In addition to other taxes, there is 
        hereby imposed on the income of each employee a tax equal to 
        the applicable percentage of the compensation received during 
        any calendar year by such employee for services rendered by 
        such employee.
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1), the term `applicable percentage' means--
                    ``(A) 4.90 percent in the case of compensation 
                received during 2001 or 2002, and
                    ``(B) in the case of compensation received during 
                any calendar year after 2002, the percentage determined 
                under section 3241 for such calendar year.''.
    (d) Determination of Rate.--Chapter 22 is amended by adding at the 
end thereof the following new subchapter:

             ``Subchapter E--Tier 2 Tax Rate Determination

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

``SEC. 3241. DETERMINATION OF TIER 2 TAX RATE BASED ON AVERAGE ACCOUNT 
              BENEFITS RATIO.

    ``(a) In General.--For purposes of sections 3201(b), 3211(b), and 
3221(b), the applicable percentage for any calendar year is the 
percentage determined in accordance with the table in subsection (b).
    ``(b) Tax Rate Schedule.--

------------------------------------------------------------------------
  Average account benefits ratio        Applicable
-----------------------------------   percentage for       Applicable
                                     sections 3211(b)    percentage for
    At least        But less than      and 3221(b)      section 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
------------------------------------------------------------------------

    ``(c) Definitions Related to Determination of Rates of Tax.--
            ``(1) Average account benefits ratio.--For purposes of this 
        section, the term `average account benefits ratio' means, with 
        respect to any calendar year, the average determined by the 
        Secretary of the account benefits ratios for the 10 most recent 
        fiscal years ending before such calendar year. If the amount 
        determined under the preceding sentence is not a multiple of 
        0.1, such amount shall be increased to the next highest 
        multiple of 0.1.
            ``(2) Account benefits ratio.--For purposes of this 
        section, the term `account benefits ratio' means, with respect 
        to any fiscal year, the amount determined by the Railroad 
        Retirement Board by dividing the fair market value of the 
        assets in the Railroad Retirement Account and of the Railroad 
        Retirement Investment Trust (and for years before 2001, the 
        Social Security Equivalent Benefits Account) as of the close of 
        such fiscal year by the total benefits and administrative 
        expenses paid from the Railroad Retirement Account and the 
        Railroad Retirement Investment Trust during such fiscal year.
    ``(d) Notice.--No later than December 1 of each calendar year, the 
Secretary shall publish a notice in the Federal Register of the rates 
of tax determined under this section which are applicable for the 
following calendar year.''.
    (e) Conforming Amendments.--
            (1) Section 24(d)(3)(A)(iii) is amended by striking 
        ``section 3211(a)(1)'' and inserting ``section 3211(a)''.
            (2) Section 72(r)(2)(B)(i) is amended by striking ``section 
        3211(a)(2)'' and inserting ``section 3211(b)''.
            (3) Paragraphs (2)(A)(iii)(II) and (4)(A) of section 
        3231(e) is amended by striking ``3211(a)(1)'' and inserting 
        ``3211(a)''.
            (4) Section 3231(e)(2)(B)(ii)(I) is amended by striking 
        ``3211(a)(2)'' and inserting ``3211(b)''.
            (5) The table of subchapters for chapter 22 is amended by 
        adding at the end the following new item:

                              ``Subchapter E. Tier 2 tax rate 
                                        determination.''.
    (f) Effective Date.--The amendments made by this section shall 
apply to calendar years beginning after December 31, 2000.
                                 <all>
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