In the Senate of the United States,
December 5, 2001.
Resolved, That the bill from the House of Representa-
tives (H.R. 10) entitled ‘‘An Act to provide for pension re-
form, and for other purposes.’’, do pass with the following
AMENDMENTS:
Strike out all after the enacting clause and insert:
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’’.
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(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 National 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-
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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 section 202(e)(7), 202(f)(2), or
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.’’.
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(b) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendment made by this
section shall take effect on the first day of the first
month that begins more than 30 days after enact-
ment, and shall apply to annuity amounts accruing
for months after the effective date in the case of annu-
ities 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
THE
EFFECTIVE
DATE.—In applying the
amendment made by this section to annuities award-
ed before the effective date, the calculation of the ini-
tial minimum amount under new section 4(g)(10)(ii)
of the Railroad Retirement 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.
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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, 2002.
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(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, 2001, 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, 2001.
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
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(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-
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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
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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
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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’’ every 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’’.
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(h) AUTOMATIC
BENEFIT
ELIGIBILITY
ADJUST-
MENTS.—Section 19 of the 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’’.
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(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, 2002.
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
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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, 2002, and shall apply
to annuity amounts accruing for months after December
2001.
SEC. 105. INVESTMENT OF RAILROAD RETIREMENT ASSETS.
(a) ESTABLISHMENT
OF NATIONAL RAILROAD RE-
TIREMENT INVESTMENT TRUST.—Section 15 of the Rail-
road Retirement Act of 1974 (45 U.S.C. 231n) is amended
by inserting after subsection (i) the following new sub-
section:
‘‘(j) NATIONAL RAILROAD RETIREMENT INVESTMENT
TRUST.—
‘‘(1) ESTABLISHMENT.—The National Railroad
Retirement Investment Trust (hereinafter in this sub-
section 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-
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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.—
‘‘(i) MEMBERSHIP.—The Trust shall
have a Board of Trustees, consisting of 7
members. Three shall represent the interests
of labor, 3 shall represent the interests of
management, and 1 shall be an independent
Trustee. The members of the Board of Trust-
ees shall not be considered officers or em-
ployees of the Government of the United
States.
‘‘(ii) SELECTION.—
‘‘(I) The 3 members representing
the interests of labor shall be selected
by the joint recommendation of labor
organizations, national in scope, orga-
nized in accordance with section 2 of
the Railway Labor Act, and rep-
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resenting at least 2⁄3 of all active em-
ployees, represented by such national
labor organizations, covered under this
Act.
‘‘(II) The 3 members representing
the interests of management shall be se-
lected by the joint recommendation of
carriers as defined in section 1 of the
Railway Labor Act employing at least
2⁄3
of all active employees covered
under this Act.
‘‘(III) The independent member
shall be selected by a majority of the
other 6 members of the Board of Trust-
ees.
A member of the Board of Trustees may be
removed in the same manner and by the
same constituency that selected that mem-
ber.
‘‘(iii) DISPUTE RESOLUTION.—In the
event that the parties specified in subclause
(I), (II), or (III) of the previous clause can-
not agree on the selection of Trustees within
60 days of the date of enactment or 60 days
from any subsequent date that a position of
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the Board of Trustees becomes vacant, an
impartial umpire to decide such dispute
shall, on the petition of a party to the dis-
pute, be appointed by the District Court of
the United States for the District of Colum-
bia.
‘‘(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 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.
The Trustee initially selected pursuant to clause
(ii)(III) shall be appointed to 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
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member whose departure caused the vacancy.
Upon the expiration of a term of a member of
the Board of Trustees, that member shall con-
tinue 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 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 in the Trust, pursuant to
the policies adopted in subparagraph (A);
‘‘(D) pay administrative expenses of the
Trust from the assets in 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:
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‘‘(A) DUTIES OF THE BOARD OF TRUST-
EES.—The Trust and each member of the Board
of Trustees shall discharge their duties (includ-
ing the voting of proxies) with respect to the as-
sets of the Trust solely in the interest of the Rail-
road Retirement Board and through it, the par-
ticipants and beneficiaries of the programs fund-
ed 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 and to
avoid disproportionate influence over a par-
ticular industry or firm, unless under the
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circumstances it is clearly prudent 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
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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
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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 per centum limitation of the preceding
sentence.
‘‘(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
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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;
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‘‘(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.
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‘‘(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, in-
cluding the Railroad Retirement Board, to provide
legal, accounting, investment advisory, or other serv-
ices 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. 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.
‘‘(8) 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.—Section 15(e) of the Railroad Re-
tirement Act of 1974 (45 U.S.C. 231n(e)) is amended—
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(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 National Railroad
Retirement Investment Trust as the Board may deter-
mine’’;
(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) MEANS OF FINANCING.—For all purposes of the
Congressional Budget Act of 1974, the Balanced Budget and
Emergency Deficit Control Act of 1985, and chapter 11 of
title 31, United States Code, and notwithstanding section
20 of the Office of Management and Budget Circular No.
A-11, the purchase or sale of non-Federal assets (other than
gains or losses from such transactions) by the National
Railroad Retirement Investment Trust shall be treated as
a means of financing.
(d) EFFECTIVE DATE.—The amendments made by this
section shall take effect on the first day of the month that
begins more than 30 days after enactment.
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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.—
(1) DETERMINATION.—As soon as possible after
December 31, 2001, the Railroad Retirement Board
shall—
(A) determine the amount of funds in the
Railroad 
Retirement 
Supplemental 
Account
under section 15(c) of the Railroad Retirement
Act of 1974 (45 U.S.C. 231n(c)) as of the date
of such determination; and
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(B) direct the Secretary of the Treasury to
transfer such funds to the National Railroad Re-
tirement Investment Trust under section 15(j) of
such Act (as added by section 105).
(2) TRANSFER
BY
THE
SECRETARY
OF
THE
TREASURY.—The Secretary of the Treasury shall
make the transfer described in paragraph (1).
(e) EFFECTIVE DATE.—
(1) IN GENERAL.—Subject to paragraph (2), the
amendments made by subsections (a), (b), and (c)
shall take effect January 1, 2002.
(2) ACCOUNT
IN
EXISTENCE
UNTIL
TRANSFER
MADE.—The Railroad Retirement Supplemental Ac-
count under section 15(c) of the Railroad Retirement
Act of 1974 (45 U.S.C. 231n(c)) shall continue to
exist until the date that the Secretary of the Treasury
makes the transfer described in subsection (d)(2).
SEC. 107. TRANSFER AUTHORITY REVISIONS.
(a) RAILROAD RETIREMENT ACCOUNT.—Section 15 of
the Railroad Retirement Act of 1974 (45 U.S.C. 231n) is
amended by adding after subsection (j) the following new
subsection:
‘‘(k) TRANSFERS TO THE TRUST.—The Board shall,
upon establishment of the National Railroad Retirement In-
vestment Trust and from time to time thereafter, direct the
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Secretary of the Treasury to transfer, in such manner as
will maximize the investment returns to the Railroad Re-
tirement system, that portion of the Railroad Retirement
Account that is not needed to pay current administrative
expenses of the Board to the National Railroad Retirement
Investment Trust. The Secretary shall make that transfer.’’.
(b) TRANSFERS FROM THE NATIONAL RAILROAD RE-
TIREMENT INVESTMENT TRUST.—Section 15 of the Rail-
road Retirement Act of 1974 (45 U.S.C. 231n), as amended
by subsection (a), is further amended by adding after sub-
section (k) the following new subsection:
‘‘(l) NATIONAL RAILROAD RETIREMENT INVESTMENT
TRUST.—The National Railroad Retirement Investment
Trust shall from time to time transfer to the disbursing
agent described in section 7(b)(4) or as otherwise directed
by the Railroad Retirement Board pursuant to 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.—
(1) TRANSFERS TO TRUST.—Section 15A(d)(2) of
the Railroad Retirement Act of 1974 (45 U.S.C.
231n–1(d)(2)) is amended to read as follows:
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‘‘(2) Upon establishment of the National Railroad Re-
tirement Investment Trust 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 and administrative expenses re-
quired to be paid from that Account to the National Rail-
road Retirement Investment Trust, and the Secretary shall
make that transfer. Any balance transferred under this
paragraph shall be used by the National Railroad Retire-
ment Investment 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 pur-
suant to chapter 31 of title 31, United States Code. The
proceeds of sales of, and the interest income from, such obli-
gations 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 (45
U.S.C. 231n–1(c)(1)) is amended by adding at the
end the following new sentence: ‘‘The Secretary shall
from time to time transfer to the disbursing agent
under section 7(b)(4) amounts necessary to pay those
benefits.’’.
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(3) 
CONFORMING
AMENDMENT.—Section
15A(d)(1) of the Railroad Retirement Act of 1974 (45
U.S.C. 231n–1(d)(1)) is amended by striking the sec-
ond and third sentences.
(d) DUAL BENEFITS PAYMENTS ACCOUNT.—Section
15(d)(1) of the Railroad Retirement Act of 1974 (45 U.S.C.
231n(d)(1)) is amended by adding at the end the following
new sentence: ‘‘The Secretary of the Treasury shall from
time to time transfer from the Dual Benefits Payments Ac-
count 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 (45 U.S.C. 231f(b)(4)) is amended to read as
follows:
‘‘(4)(A) The Railroad Retirement Board, after con-
sultation with the Board of Trustees of the National Rail-
road Retirement Investment Trust and the Secretary of the
Treasury, shall enter into an arrangement with a non-
governmental financial institution to serve as disbursing
agent for benefits payable under this Act who shall disburse
consolidated benefits under this Act to each recipient. Pend-
ing the taking effect of that arrangement, benefits shall be
paid as under the law in effect prior to the enactment of
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the Railroad Retirement and Survivors’ Improvement Act
of 2001.
‘‘(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 Dual Benefits
Payments Account to the disbursing agent to make
payments of benefits and the Secretary of the Treas-
ury shall transfer those amounts;
‘‘(ii) to the Board of Trustees of the National
Railroad Retirement Investment Trust the amounts
required to be transferred from the National Railroad
Retirement Investment Trust to the disbursing agent
to make payments of benefits and the Board of Trust-
ees shall transfer those amounts; and
‘‘(iii) to the disbursing agent the name and ad-
dress 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 Rail-
road Retirement Act of 1974 (45 U.S.C. 231f(c)(1)) 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
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from the National Railroad Retirement Investment
Trust or the Social Security Equivalent Benefit Ac-
count, 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 sections 15(k) and
15A(d)(2) of the Railroad Retirement Act of 1974, as
amended by subsections (a) and (c), respectively, the Rail-
road Retirement Board shall consult with the Secretary of
the Treasury to design an appropriate method to transfer
obligations held as of the date of enactment of this Act or
to convert such obligations to cash at the discretion of the
Railroad Retirement Board prior to transfer. The National
Railroad Retirement Investment Trust may hold to matu-
rity any obligations so received 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 (45 U.S.C. 231u(a)(1)) is
amended—
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(1) by inserting after the first sentence the fol-
lowing new sentence: ‘‘On or before May 1 of each
year beginning in 2003, the Railroad Retirement
Board shall compute its projection of the account ben-
efits 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 fis-
cal years.’’; and
(2) by striking ‘‘the projection prepared pursu-
ant to the preceding sentence’’ and inserting ‘‘the pro-
jections prepared pursuant to the preceding two sen-
tences’’.
(b) CERTIFICATIONS.—The Railroad Retirement Act of
1974 (45 U.S.C. 231 et seq.) is amended by adding at the
end the following new section:
‘‘COMPUTATION AND CERTIFICATION OF ACCOUNT BENEFIT
RATIOS
‘‘SEC. 23. (a) INITIAL COMPUTATION AND CERTIFI-
CATION.—On or before November 1, 2003, the Railroad Re-
tirement 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 of the Treasury.
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‘‘(b) COMPUTATIONS
AND
CERTIFICATIONS
AFTER
2003.—On or before November 1 of each year after 2003,
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 of the Treasury.
‘‘(c) DEFINITION.—As used in this section, the term
‘account benefits 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 amend-
ment to, or repeal of, a section or other provision, the ref-
erence 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 NATIONAL RAILROAD
RETIREMENT INVESTMENT TRUST.
Subsection (c) of section 501 is amended by adding
at the end the following new paragraph:
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‘‘(28) The National Railroad Retirement Invest-
ment Trust established under section 15(j) of the Rail-
road 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) and by redes-
ignating subsection (e) as subsection (c).
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to calendar years beginning after De-
cember 31, 2001.
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.
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‘‘(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 2002,
‘‘(B) 14.2 percent in the case of compensa-
tion paid during 2003, and
‘‘(C) in the case of compensation paid dur-
ing any calendar year after 2003, the percentage
determined under section 3241 for such calendar
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 represent-
ative a tax equal to the applicable percentage of the com-
pensation received during any calendar year by such em-
ployee 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 sec-
tion 3111 for the calendar year.
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‘‘(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 compensa-
tion received during 2002,
‘‘(B) 14.20 percent in the case of compensa-
tion received during 2003, and
‘‘(C) in the case of compensation received
during any calendar year after 2003, 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-
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ployee 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 compensa-
tion received during 2002 or 2003, and
‘‘(B) in the case of compensation received
during any calendar year after 2003, the per-
centage determined under section 3241 for such
calendar year.’’.
(d) DETERMINATION OF RATE.—Chapter 22 is amend-
ed by adding at the end 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 cal-
endar year is the percentage determined in accordance with
the table in subsection (b).
‘‘(b) TAX RATE SCHEDULE.—
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‘‘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 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 mul-
tiple 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 di-
viding the fair market value of the assets in the Rail-
road Retirement Account and of the National Rail-
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road Retirement Investment Trust (and for years be-
fore 2002, the Social Security Equivalent Benefits Ac-
count) as of the close of such fiscal year by the total
benefits and administrative expenses paid from the
Railroad Retirement Account and the National Rail-
road Retirement Investment Trust during such fiscal
year.
‘‘(d) NOTICE.—No later than December 1 of each cal-
endar year, the Secretary shall publish a notice in the Fed-
eral Register of the rates of tax determined under this sec-
tion which are applicable for the following calendar year.’’.
(e) CONFORMING AMENDMENTS.—
(1) Section 24(d)(3)(A)(iii) is amended by strik-
ing ‘‘section 3211(a)(1)’’ and inserting ‘‘section
3211(a)’’.
(2) Section 72(r)(2)(B)(i) is amended by striking
‘‘3211(a)(2)’’ and inserting ‘‘3211(b)’’.
(3) Paragraphs (2)(A)(iii)(II) and (4)(A) of sec-
tion 3231(e) are 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.’’.
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(f) EFFECTIVE DATE.—The amendments made by this
section shall apply to calendar years beginning after De-
cember 31, 2001.
Amend the title so as to read: ‘‘An Act to modernize
the financing of the railroad retirement system and to
provide enhanced benefits to employees and bene-
ficiaries.’’.
Attest:
Secretary.