II
Calendar No. 924
106TH CONGRESS
2D SESSION
H.R. 4844
[Report No. 106–475]
IN THE SENATE OF THE UNITED STATES
SEPTEMBER 8, 2000
Received; read twice and referred to the Committee on Finance
OCTOBER 3 (legislative day, SEPTEMBER 22), 2000
Reported by Mr. ROTH, with an amendment
[Strike out all after the enacting clause and insert the part printed in italic]
AN ACT
To modernize the financing of the railroad retirement system
and to provide enhanced benefits to employees and bene-
ficiaries.
Be it enacted by the Senate and House of Representa-
tives 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
2000’’.
(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 Retire-
ment 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 ad-
justments.
TITLE I—AMENDMENTS TO RAIL-
ROAD
RETIREMENT
ACT
OF
1974
SEC. 101. EXPANSION OF WIDOW’S AND WIDOWER’S BENE-
FITS.
(a) IN GENERAL.—Section 4(g) of the Railroad Re-
tirement Act of 1974 is amended by adding at the end
the following new subdivision:
‘‘(10)(i) If for any month the unreduced annuity pro-
vided 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 Secu-
rity Act, and without regard to any reduction for entitle-
ment to a public service pension pursuant to sections
202(e)(7), 202(f)(2), or section 202(g)(4) of the Social Se-
curity 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 enti-
tled 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 award-
ed 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 amend-
ments made by this section to annuities awarded be-
fore 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 sub-
section, individuals entitled to an annuity under section
2(a)(1)(ii) of this Act shall, except for the purposes of re-
computations in accordance with section 215(f) of the So-
cial 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 amend-
ed 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 para-
graph (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 an-
nuity amount provided under section 3(a) for the in-
dividual on whose employment record the spouse an-
nuity 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 pur-
poses 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 sec-
tion 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 sec-
tion 2(a)(1)(iii).’’.
(b) COMPUTATION RULE FOR INDIVIDUALS’ ANNU-
ITIES.—Section 3(a) of the Railroad Retirement Act of
1974, as amended by section 102 of this Act, is further
‘‘(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 sur-
vivors of such individual, shall not be entitled to an annu-
ity amount provided under section 3(a), section 4(a), or
section 4(f) of this Act unless the individual, or the indi-
vidual’s spouse, divorced spouse, or survivors, would be en-
titled 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’
ANNU-
ITIES.—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 subdivi-
sion:
‘‘(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 Se-
curity 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 Se-
curity Act began or (B) the first date on which the annu-
itant 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 require-
ment 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 fol-
lowing: ‘‘An application filed with the Board for an em-
ployee 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 applica-
tion for any benefit to which such applicant may be enti-
tled under this Act or title II of the Social Security Act.’’.
(g) CREDITING SERVICE UNDER THE SOCIAL SECU-
RITY ACT.—Section 18(2) of the Railroad Retirement Act
of 1974 is amended—
(1) by inserting ‘‘or less than five years of serv-
ice, 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 serv-
ice, all of which accrues after December 31, 1995,’’
after ‘‘ten or more years of service’’.
(h)
AUTOMATIC
BENEFIT
ELIGIBILITY
ADJUST-
MENTS.—Section 19 of Railroad Retirement Act of 1974
is amended—
(1) by inserting ‘‘or five or more years of serv-
ice, 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 serv-
ice, 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 De-
cember 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 De-
cember 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 serv-
ice, 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 Rail-
road Retirement Act of 1974 is amended by striking para-
graph (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 De-
cember 2000.
SEC. 105. INVESTMENT OF RAILROAD RETIREMENT ASSETS.
(a) ESTABLISHMENT OF RAILROAD RETIREMENT IN-
VESTMENT TRUST.—Section 15 of the Railroad Retire-
ment Act of 1974 is amended by inserting after subsection
(i) the following:
‘‘(j) RAILROAD RETIREMENT INVESTMENT TRUST.—
‘‘(1) ESTABLISHMENT.—The Railroad Retire-
ment Investment Trust (hereinafter in this sub-
section referred to as the ‘Trust’) is hereby estab-
lished. 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 Dis-
trict of Columbia and shall, to the extent not incon-
sistent with this Act, be subject to the laws of the
District of Columbia applicable to such trusts.
‘‘(2) NOT A FEDERAL AGENCY OR INSTRUMEN-
TALITY.—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 mem-
bers, 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 inter-
ests of the general public. The members of the
Board of Trustees shall not be considered offi-
cers 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 exper-
tise in the management of financial investments
and pension plans. No member of the Railroad
Retirement Board shall be eligible to be a mem-
ber 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 ap-
pointed 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 suc-
cessor 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 invest-
ment guidelines;
‘‘(B) retain independent investment man-
agers to invest the assets of the Fund in a
manner consistent with such investment guide-
lines;
‘‘(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 ex-
penses related to those benefits.
‘‘(5) REPORTING
REQUIREMENTS
AND
FIDU-
CIARY
STANDARDS.—The
following
reporting
re-
quirements 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 TRUST-
EES.—The Railroad Retirement Trust and each
member of the Board of Trustees shall dis-
charge their duties with respect to the assets of
the Fund solely in the interest of the Railroad
Retirement Board and through it, the partici-
pants and beneficiaries of the programs funded
under this Act—
‘‘(i) for the exclusive purpose of—
‘‘(I) providing benefits to partici-
pants and their beneficiaries; and
‘‘(II)
defraying
reasonable
ex-
penses 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 mat-
ters would use in the conduct of an enter-
prise 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 pru-
dent not to do so; and
‘‘(iv) in accordance with Trust gov-
erning 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
bene-
ficiaries; 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 IN-
SURANCE.—Any provision in an agreement or
instrument that purports to relieve a trustee
from responsibility or liability for any responsi-
bility, obligation or duty under this Act shall be
void: Provided, however, That nothing shall
preclude—
‘‘(i) the Trust from purchasing insur-
ance for its trustees or for itself to cover
liability or losses occurring by reason of
the act or omission of a trustee, if such in-
surance 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 insur-
ance to cover liability under this section
from and for his own account; or
‘‘(iii) an employer or an employee or-
ganization from purchasing insurance to
cover potential liability of one or more
trustees with respect to their fiduciary re-
sponsibilities, 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 dis-
honesty on the part of any Trust official, di-
rectly 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, ex-
cept that the Railroad Retirement Board,
after consideration of the record, may pre-
scribe 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 hav-
ing 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 re-
quirements this subsection have not been
met.
‘‘(iii) It shall be unlawful for any per-
son to procure any bond required by this
subsection from any surety or other com-
pany 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 an-
nual management report to the Congress
not later than 180 days after the end of
the Trust’s fiscal year. A management re-
port under this subsection shall include—
‘‘(I) a statement of financial po-
sition;
‘‘(II) a statement of operations;
‘‘(III) a statement of cash flows;
‘‘(IV) a statement on internal ac-
counting and administrative control
systems;
‘‘(V) the report resulting from an
audit of the financial statements of
the Trust conducted under subpara-
graph (E)(i); and
‘‘(VI) any other comments and
information necessary to inform the
Congress about the operations and fi-
nancial 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 Manage-
ment and Budget a copy of the manage-
ment report when it is submitted to Con-
gress.
‘‘(F) ENFORCEMENT.—The Railroad Re-
tirement 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 profes-
sional staff, and contract with outside advisers to
provide legal, accounting, investment advisory or
other services necessary for the proper administra-
tion 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. Invest-
ment guidelines must be adopted by a unanimous
vote of the entire Board of Trustees. All other deci-
sions 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 sec-
ond 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 AC-
COUNT.
(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 Re-
tirement 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 con-
tinue 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 Rail-
road 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 Sec-
retary of the Treasury to transfer, in such manner as will
maximize the investment returns to the Railroad Retire-
ment system, that portion of the Railroad Retirement Ac-
count that is not needed to pay current administrative ex-
penses 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 sub-
section (k) the following:
‘‘(l) RAILROAD RETIREMENT TRUST FUND.—The
Railroad Retirement Trust shall from time to time trans-
fer 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 AC-
COUNT.—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.—Sec-
tion 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 sen-
tences.
(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 Sec-
retary of the Treasury shall from time to time transfer
from the Dual Benefits Payments Account to the dis-
bursing agent under section 7(b)(4) amounts necessary to
pay benefits payable from that Account.’’.
(e)
CERTIFICATION
BY
THE
BOARD
AND
PAY-
MENT.—Paragraph (4) of section 7(b) of the Railroad Re-
tirement Act of 1974 is amended to read as follows:
‘‘(4)(A) The Railroad Retirement Board, after con-
sultation with the Board of Trustees of the Railroad Re-
tirement Trust and the Secretary of the Treasury, shall
enter into an arrangement with a nongovernmental finan-
cial 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 Sec-
retary 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 In-
vestment Trust to the disbursing agent to make pay-
ments of benefits and the Board of Trustees shall
transfer those amounts; and
‘‘(iii) to the disbursing agent the name and ad-
dress of each individual entitled to receive a pay-
ment, 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 So-
cial 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 OBLIGA-
TION.—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 Retire-
ment Trust may hold to maturity any obligations so re-
ceived or may redeem them prior to maturity, as the Trust
deems appropriate.
SEC.
108.
ANNUAL
RATIO
PROJECTIONS
AND
CERTIFI-
CATIONS
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 be-
ginning in 2002, the Railroad Retirement Board
shall compute its projection of the account benefits
ratio and the average account benefits ratio (as de-
fined 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 pursu-
ant 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 RETIRE-
MENT 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 REPRESENTA-
TIVES.—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 compensa-
tion 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 compensa-
tion paid during 2001,
‘‘(B) 14.2 percent in the case of compensa-
tion paid during 2002, and
‘‘(C) in the case of compensation paid dur-
ing any calendar year after 2002, the percent-
age determined under section 3241 for such cal-
endar year.’’.
(b) RATE
OF TAX
ON EMPLOYEE REPRESENTA-
TIVES.—Section 3211, as amended by section 203, is
amended by striking subsection (a) and inserting the fol-
lowing new subsections:
‘‘(a) TIER 1 TAX.—In addition to other taxes, there
is hereby imposed on the income of each employee rep-
resentative a tax equal to the applicable percentage of the
compensation received during any calendar year by such
employee representative for services rendered by such em-
ployee representative. For purposes of the preceding sen-
tence, the term ‘applicable percentage’ means the percent-
age 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 em-
ployee 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 com-
pensation received during 2001,
‘‘(B) 14.20 percent in the case of com-
pensation received during 2002, and
‘‘(C) in the case of compensation received
during any calendar year after 2002, the per-
centage 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 em-
ployee a tax equal to the applicable percentage of
the compensation received during any calendar year
by such employee for services rendered by such em-
ployee.
‘‘(2) APPLICABLE PERCENTAGE.—For purposes
of paragraph (1), the term ‘applicable percentage’
means—
‘‘(A) 4.90 percent in the case of compensa-
tion received during 2001 or 2002, and
‘‘(B) in the case of compensation received
during any calendar year after 2002, the per-
centage determined under section 3241 for such
calendar year.’’.
(d)
DETERMINATION
OF
RATE.—Chapter
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 ac-
count 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 ac-
cordance with the table in subsection (b).
‘‘(b) TAX RATE SCHEDULE.—
Average account benefits ratio
Applicable per-
centage for sec-
tions 3211(b) and
3221(b)
Applicable per-
centage for section
3201(b)
At least
But less than
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
‘‘(c) DEFINITIONS RELATED TO DETERMINATION OF
RATES OF TAX.—
‘‘(1) AVERAGE
ACCOUNT
BENEFITS
RATIO.—
For purposes of this section, the term ‘average ac-
count benefits ratio’ means, with respect to any cal-
endar 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 in-
creased to the next highest multiple of 0.1.
‘‘(2) ACCOUNT
BENEFITS
RATIO.—For pur-
poses 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 Rail-
road 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 strik-
ing ‘‘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.
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Railroad Retirement and Survivors’ Improvement Act of
2000’’.
(b) TABLE OF CONTENTS.—
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 adjust-
ments.
TITLE I—AMENDMENTS TO RAIL-
ROAD RETIREMENT ACT OF
1974
SEC. 101. EXPANSION OF WIDOW’S AND WIDOWER’S BENE-
FITS.
(a) IN GENERAL.—Section 4(g) of the Railroad Retire-
ment Act of 1974 (45 U.S.C. 231c(g)) is amended by adding
at the end the following new subdivision:
‘‘(10)(i) If for any month the unreduced annuity pro-
vided under this section for a widow or widower is less than
the widow’s or widower’s initial minimum amount com-
puted pursuant to paragraph (ii) of this subdivision, the
unreduced annuity shall be increased to that initial min-
imum amount. For the purposes of this subdivision, the un-
reduced annuity is the annuity without regard to any de-
duction on account of work, without regard to any reduc-
tion 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 enti-
tled to a widow’s or widower’s annuity under section
2(d)(1)(ii) of this Act becomes entitled to a widow’s or wid-
ower’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) IN GENERAL.—The amendment made by this
section shall take effect on January 1, 2001, and shall
apply to annuity amounts accruing for months after
December 2000 in the case of annuities awarded—
(A) on or after that date; and
(B) before that date, but only if the annuity
amount under section 4(g) of the Railroad Re-
tirement Act of 1974 (45 U.S.C. 231c(g)) was
computed under such section, as amended by the
Omnibus Budget Reconciliation Act of 1981
(Public Law 97–35; 95 Stat. 357).
(2) SPECIAL RULE FOR ANNUITIES AWARDED BE-
FORE JANUARY 1, 2001.—In applying the amendment
made by this section to annuities awarded before Jan-
uary 1, 2001, the calculation of the initial minimum
amount under section 4(g)(10)(ii) of the Railroad Re-
tirement Act of 1974 (45 U.S.C. 231c(g)(10)(ii)), as
added by subsection (a), shall be made as of the date
of the 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 (45 U.S.C. 231b(a)(2)) is
amended by inserting after ‘‘(2)’’ the following new sen-
tence: ‘‘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 (45 U.S.C.
231c(a)(2)) 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 of 1974 (45
U.S.C. 231b(a)(3), 231c(a)(3), and 231c(a)(4)) are re-
pealed.
(d) EFFECTIVE DATES.—
(1) GENERALLY.—Except as provided in para-
graph (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) of the Rail-
road Retirement Act of 1974 (45 U.S.C. 231c(a))
shall be computed under section 4(a)(3) of such Act,
as in effect on December 31, 2000, if the annuity
amount provided under section 3(a) of such Act (45
U.S.C. 231b(a)) for the individual on whose employ-
ment record the spouse annuity is based was com-
puted under section 3(a)(3) of such Act, as in effect
on December 31, 2000.
SEC. 103. VESTING REQUIREMENT.
(a) CERTAIN ANNUITIES FOR INDIVIDUALS.—Section
2(a) of the Railroad Retirement Act of 1974 (45 U.S.C.
231a(a)) is amended—
(1) by inserting in subdivision (1) ‘‘(or, for pur-
poses 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 new sub-
division:
‘‘(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 in-
dividual may also be entitled to an annuity amount com-
puted 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’ ANNU-
ITIES.—Section 3(a) of the Railroad Retirement Act of
1974 (45 U.S.C. 231b(a)), as amended by section 102 of
this Act, is further amended by adding at the end the fol-
lowing new subdivision:
‘‘(3) If an individual entitled to an annuity under sec-
tion 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 Secu-
rity 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 condi-
tions 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 (45 U.S.C. 231a(d)(1))
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 (45 U.S.C. 231a) is
amended by adding at the end the following new subsection:
‘‘(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 title II of the Social Security Act on the
basis of the individual’s employment record under both this
Act and title II of the Social Security Act.’’.
(e) COMPUTATION RULE FOR SPOUSES’ ANNUITIES.—
Section 4(a) of the Railroad Retirement Act of 1974 (45
U.S.C. 231c(a)), 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 Secu-
rity 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 annu-
ity 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 condi-
tions 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 applica-
tion be filed.’’.
(f) APPLICATION DEEMING PROVISION.—Section 5(b)
of the Railroad Retirement Act of 1974 (45 U.S.C. 231d(b))
is amended by striking the second sentence and inserting
the following new sentence: ‘‘An application filed with the
Board for an employee annuity, spouse annuity, or di-
vorced 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 SECU-
RITY ACT.—Section 18(2) of the Railroad Retirement Act
of 1974 (45 U.S.C. 231q(2)) is amended—
(1) by inserting ‘‘(or less than five years of serv-
ice, all of which accrues after December 31, 1995)’’
after ‘‘ten years of service’’ each place it appears; and
(2) by inserting ‘‘(or five or more years of serv-
ice, all of which accrues after December 31, 1995)’’
after ‘‘ten or more years of service’’.
(h) AUTOMATIC
BENEFIT
ELIGIBILITY
ADJUST-
MENTS.—Section 19 of Railroad Retirement Act of 1974
(45 U.S.C. 231r) is amended—
(1) by inserting ‘‘(or five or more years of serv-
ice, 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 serv-
ice, 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 (45 U.S.C. 231e(1)) is amended by insert-
ing ‘‘(or five or more years of service, all of which ac-
crues after December 31, 1995)’’ after ‘‘ten years of
service’’.
(2) Section 7(b)(2)(A) of the Railroad Retire-
ment Act of 1974 (45 U.S.C. 231f(b)(2)(A)) is amend-
ed 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 (42
U.S.C. 405(i)) is amended by inserting ‘‘(or five or
more years of service, all of which accrues after De-
cember 31, 1995)’’ after ‘‘ten years of service’’.
(4) Section 6(b)(2) of the Railroad Retirement
Act of 1974 (45 U.S.C. 231e(b)(2)) is amended by in-
serting ‘‘(or five or more years of service, all of which
accrues after December 31, 1995)’’ after ‘‘ten years of
service’’ the second place it appears.
(j) EFFECTIVE DATE.—The amendments made by this
section shall take effect on January 1, 2001.
SEC. 104. REPEAL OF RAILROAD RETIREMENT MAXIMUM.
(a) EMPLOYEE ANNUITIES.—
(1) IN GENERAL.—Section 3(f) of the Railroad
Retirement Act of 1974 (45 U.S.C. 231b(f)) is
amended—
(A) by striking subdivision (1); and
(B) by redesignating subdivisions (2) and
(3) as subdivisions (1) and (2), respectively.
(2) CONFORMING AMENDMENTS.—
(A) The first sentence of section 3(f)(1) of
the Railroad Retirement Act of 1974 (45 U.S.C.
231b(f)(1)), 
as 
redesignated 
by 
paragraph
(1)(B), is amended by striking ‘‘, without regard
to the provisions of subdivision (1) of this sub-
section,’’.
(B) Paragraphs (i) and (ii) of section
7(d)(2) of the Railroad Retirement Act of 1974
(45 U.S.C. 231f(d)(2)) are each amended by
striking ‘‘section 3(f)(3)’’ and inserting ‘‘section
3(f)(2)’’.
(b) SPOUSE AND SURVIVOR ANNUITIES.—Section 4 of
the Railroad Retirement Act of 1974 (45 U.S.C. 231c) is
amended by striking subsection (c).
(c) EFFECTIVE DATE.—The amendments made by this
section shall take effect on 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 IN-
VESTMENT TRUST.—Section 15 of the Railroad Retirement
Act of 1974 (45 U.S.C. 231n) is amended by inserting after
subsection (i) the following new subsection:
‘‘(j) RAILROAD RETIREMENT INVESTMENT TRUST.—
‘‘(1) ESTABLISHMENT.—The Railroad Retire-
ment Investment Trust (hereafter in this subsection
referred to as the ‘Trust’) is hereby established as a
Trust domiciled 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 appli-
cable to such trusts. The Trust shall manage and in-
vest its assets in the manner set forth in this sub-
section.
‘‘(2) NOT A FEDERAL AGENCY OR INSTRUMEN-
TALITY.—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 7 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 7 members, 3 shall rep-
resent the interests of labor, 3 shall represent the
interests of management, and 1 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 exper-
tise in the management of financial investments
and pension plans. No member of the Railroad
Retirement Board shall be eligible to be a mem-
ber 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 ap-
pointed under this paragraph shall be divided
into 3 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 se-
lection 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 ap-
pointed.
‘‘(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 invest-
ment guidelines;
‘‘(B) retain independent investment man-
agers to invest the assets of the Trust in a man-
ner consistent with such investment guidelines;
‘‘(C) invest assets of the Trust, pursuant to
the policies adopted in subparagraph (A);
‘‘(D) pay administrative expenses of the
Trust from the assets of the Trust; and
‘‘(E) transfer money to the disbursing agent
or as otherwise provided in section 7(b)(4), to
pay benefits payable under this Act from the as-
sets of the Trust.
‘‘(5) REPORTING REQUIREMENTS AND FIDUCIARY
STANDARDS.—The following reporting requirements
and fiduciary standards shall apply with respect to
the Trust:
‘‘(A) DUTIES OF THE BOARD OF TRUST-
EES.—The Trust and each member of the Board
of Trustees shall discharge their duties with re-
spect to the assets of the Trust solely in the inter-
est 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 partici-
pants and their beneficiaries; and
‘‘(II) defraying reasonable ex-
penses of administering the functions
of the Trust;
‘‘(ii) with the care, skill, prudence, and
diligence under the circumstances then pre-
vailing that a prudent person acting in a
like capacity and familiar with such mat-
ters would use in the conduct of an enter-
prise 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 pru-
dent not to do so; and
‘‘(iv) in accordance with Trust gov-
erning documents and instruments insofar
as such documents and instruments are con-
sistent 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 Trust 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 Trust on behalf of a party
(or represent a party) whose interests are
adverse to the interests of the Trust, 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 Trust.
‘‘(C) EXCULPATORY PROVISIONS AND INSUR-
ANCE.—Any provision in an agreement or in-
strument 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 insur-
ance for its trustees or for itself to cover li-
ability or losses occurring by reason of the
act or omission of a trustee, if such insur-
ance permits recourse by the insurer against
the trustee in the case of a breach of a fidu-
ciary obligation by such trustee;
‘‘(ii) a trustee from purchasing insur-
ance to cover liability under this section
from and for his own account; or
‘‘(iii) an employer or an employee or-
ganization from purchasing insurance to
cover potential liability of one or more
trustees with respect to their fiduciary re-
sponsibilities, obligations, and duties under
this section.
‘‘(D) BONDING.—Every trustee and every
person who handles funds or other property of
the Trust (hereafter in this subsection referred to
as ‘Trust official’) shall be bonded. Such bond
shall provide protection to the Trust 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 han-
dled. In no case shall such bond be less than
$1,000 nor more than $500,000, except that
the Railroad Retirement Board, after con-
sideration of the record, may prescribe an
amount in excess of $500,000, subject to the
10 percent limitation of the preceding sen-
tence.
‘‘(ii) It shall be unlawful for any Trust
official to receive, handle, disburse, or other-
wise exercise custody or control of any of
the funds or other property of the Trust
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 offi-
cial, with respect to whom the requirements
of this subsection have not been met.
‘‘(iii) It shall be unlawful for any per-
son to procure any bond required by this
subsection from any surety or other com-
pany 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
Trust.
‘‘(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 posi-
tion;
‘‘(II) a statement of operations;
‘‘(III) a statement of cash flows;
‘‘(IV) a statement on internal ac-
counting and administrative control
systems;
‘‘(V) the report resulting from an
audit of the financial statements of the
Trust conducted under clause (i); and
‘‘(VI) any other comments and in-
formation necessary to inform the Con-
gress about the operations and finan-
cial condition of the Trust.
‘‘(iii) The Trust shall provide the
President, the Railroad Retirement Board,
and the Director of the Office of Manage-
ment and Budget a copy of the management
report when it is submitted to Congress.
‘‘(F) ENFORCEMENT.—The Railroad Retire-
ment Board may bring a civil action—
‘‘(i) to enjoin any act or practice by
the Trust, its Board of Trustees or its em-
ployees or agents that violates any provi-
sion of this Act; or
‘‘(ii) to obtain other appropriate relief
to redress such violations, or to enforce any
provisions of this Act.
‘‘(6) APPLICATION OF FIDUCIARY STANDARDS TO
RAILROAD RETIREMENT BOARD.—
‘‘(A) IN GENERAL.—The provisions of para-
graph (5)(A) shall apply to the members of the
Railroad Retirement Board in the discharge of
their duty to appoint the members of the Board
of Trustees under paragraph (3)(A) in the same
manner as such provisions apply to the members
of the Board of Trustees.
‘‘(B) ENFORCEMENT.—For purposes of this
paragraph, the provisions of paragraph (5)(F)
shall apply by substituting ‘the Secretary of
Labor’ for ‘the Railroad Retirement Board’.
‘‘(7) RULES
AND
ADMINISTRATIVE
POWERS.—
The Board of Trustees shall have the authority to
make rules to govern its operations, employ profes-
sional staff, and contract with outside advisers to pro-
vide legal, accounting, investment advisory or other
services necessary for the proper administration of
this subsection. In the case of contracts with invest-
ment 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 serv-
ices.
‘‘(8) QUORUM.—Five members of the Board of
Trustees constitute a quorum to do business. Invest-
ment 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.
‘‘(9) FUNDING.—The expenses of the Trust and
the Board of Trustees incurred under this subsection
shall be paid from the Trust.’’.
(b) CONFORMING AND TECHNICAL AMENDMENTS GOV-
ERNING INVESTMENTS.—Subsection 15(e) of the Railroad
Retirement Act of 1974 (45 U.S.C. 231n(e)) is amended—
(1) 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 Ac-
count as are not transferred to the Railroad Retire-
ment 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 enactment of this sec-
tion.
SEC. 106. ELIMINATION OF SUPPLEMENTAL ANNUITY AC-
COUNT.
(a) SOURCE OF PAYMENTS.—Section 7(c)(1) of the
Railroad Retirement Act of 1974 (45 U.S.C. 231f(c)(1)) is
amended by striking ‘‘payments of supplemental annuities
under section 2(b) of this Act shall be made from the Rail-
road Retirement Supplemental Account, and’’.
(b) ELIMINATION OF ACCOUNT.—Section 15(c) of the
Railroad Retirement Act of 1974 (45 U.S.C. 231n(c)) is re-
pealed.
(c) AMENDMENT
TO RAILROAD RETIREMENT AC-
COUNT.—Section 15(a) of the Railroad Retirement Act of
1974 (45 U.S.C. 231n(a)) 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) TRANSFER.—