Railroad Retirement Board: Actions Needed to Improve the Effectiveness and Oversight of Continuing Disability Reviews
Released: 2018-02-21T00:00:00

Letter

Background

RRB administers retirement, survivor, disability, unemployment, and sickness benefits for railroad workers and their families under the provisions of the Railroad Retirement Act of 1974, as amended (RRA) and the Railroad Unemployment Insurance Act of 1938, as amended (RUIA). Individuals who work for railroads engaged in interstate commerce, for railroad associations, and for railroad labor organizations are among those covered by RRB’s benefits system instead of Social Security or the federal-state unemployment insurance system. During fiscal year 2016, RRB received approximately $12 billion in funding, about half of which came from payroll taxes levied on railroad workers and their employers. Almost all of the funding was used to pay benefits, including unemployment benefits. In addition, RRB administers Medicare coverage for railroad workers.

The railroad retirement system and Social Security system are separate but linked with regard to benefit payments and taxes. Railroad workers and their employers pay the same payroll taxes as other workers covered by Social Security for comparable retirement, disability, unemployment insurance, and Medicare benefits. RRB also collects taxes to cover additional benefits. A financial interchange between the two systems allows funds to be transferred between RRB and Social Security accounts based on the amount of Social Security benefits that workers would have received if they were covered by Social Security, as well as the payroll taxes that would have been collected if the railroad workers were covered by Social Security instead of their own system. According to RRB data, the railroad retirement, survivor, and disability system is projected to remain solvent over at least the next 25 years.

Railroad Retirement Act Disability Benefits

Under the RRA, RRB provides two distinct disability benefits for railroad workers—total and permanent (T&P) disability and occupational disability. For T&P disability, RRB makes determinations about railroad workers’ disability claims independent of but using the same general criteria that the Social Security Administration (SSA) uses to administer its Disability Insurance program. That is, a worker must have a medically determinable physical or mental impairment that (1) has lasted (or is expected to last) at least 1 year or is expected to result in death, and (2) prevents them from engaging in substantial gainful activity, defined as work activity that involves significant physical or mental activities performed for pay or profit. In other words, these workers are essentially deemed unable to engage in any regular employment. According to RRB’s 2017 Annual Report, at the end of fiscal year 2016, the agency was paying 10,300 T&P disability beneficiaries an average of $1,911 each per month for a total of about $236 million annually. In fiscal year 2016, data provided by RRB indicate that the agency approved about 78 percent of the 843 applications for T&P disability benefits it received.

Occupational disability is a unique benefit for railroad workers. RRB provides these benefits to workers who have physical or mental impairments that prevent them from performing their specific railroad job, even though they may be able to perform other kinds of work. For example, a railroad engineer who cannot frequently climb, bend, or reach, as required by the job, may be found to be occupationally disabled. To be eligible for occupational disability benefits, workers must meet certain labor- and management-negotiated disability criteria as well as certain age and service requirements. Railroad workers age 60 and older with at least 10 years of service are eligible to apply, as well as workers of any age with at least 20 years of service. Workers determined to be eligible for occupational disability benefits may be able to return to the workforce, but generally not to their original occupation. According to RRB, at the end of fiscal year 2016, the agency was paying 21,000 occupational disability beneficiaries an average of $3,053 each per month for a total of about $769 million annually. In fiscal year 2016, data provided by RRB indicate that the agency approved about 98 percent of the 984 applications for occupational disability benefits it received.

Continuing Disability Reviews

Federal law generally requires RRB to conduct CDRs to determine if beneficiaries continue to meet the disability requirements of the law. RRB conducts two overall types of CDRs: medical and earnings. In a medical CDR, disability examiners review a beneficiary’s medical records and may order additional examinations to determine whether the individual’s medical condition has improved to the point where it is no longer considered disabling. In an earnings CDR, disability examiners review earnings to determine whether beneficiaries are earning income that exceeds program limits, which could make them ineligible for benefits. If the agency, while conducting an earnings review, obtains information that indicates the beneficiary’s medical condition has improved, RRB can initiate a medical CDR as well. Similarly, if RRB discovers earnings above program limits while developing evidence for a medical review, the agency may initiate an earnings CDR.

Medical Continuing Disability Reviews

RRB generally conducts medical reviews with a frequency determined by the beneficiary’s likelihood of medical improvement, which may fall into one of three categories: medical improvement expected (MIE)—when a beneficiary’s impairment demonstrates medical improvement, when improvement is unpredictable, or when medical intervention may change the impairment’s severity, among other reasons; medical improvement possible (MIP)—when a beneficiary’s disability may improve, or the likelihood of medical improvement within 3 years is not probable; or medical improvement not expected (MINE)—when a beneficiary’s impairment meets certain listings such as blindness or hearing loss and generally when a beneficiary has attained 54 ½ years of age.

If a beneficiary’s disability is classified as MIE, RRB generally reviews the beneficiary’s continuing eligibility for disability benefits at intervals from 6 months to 18 months. For MIP cases, RRB mails a questionnaire at least once every 3 years that asks a beneficiary to update medical and earnings information. If the self-reported information indicates medical improvement or a return to work, RRB may conduct a CDR. For MINE cases, RRB’s regulations state that it will not routinely review the beneficiary’s continuing eligibility. (See fig. 1.) According to RRB’s guidance, factors such as age and work experience may also affect how and when RRB classifies a beneficiary as MINE, or whether it should schedule (or “diary”) a CDR. RRB maintains a list of scheduled CDRs in its CDR Call-Up program. It uses this program to both identify CDRs that require completion and to schedule CDRs based on the likelihood of medical improvement.

RRB also started conducting CDRs in 2015 that target cases at high risk of potential fraud and which officials said could result in the termination of benefits.

Earnings Continuing Disability Reviews

In addition to medical reviews, RRB conducts earnings CDRs for beneficiaries detected with earnings that exceed disability program limits. Most earnings CDRs are triggered by unreported earnings detected through RRB’s policing operation. Policing for earnings involves an annual data match by SSA in which it uses RRB’s disability beneficiary database and Internal Revenue Service (IRS) earnings data to detect unreported earnings. (See fig. 2.) In this process, RRB provides SSA with a record of all disability beneficiaries, and SSA matches these beneficiaries against IRS earnings data. For those cases in which earnings are identified, RRB has an earnings reconciliation process to determine which beneficiaries may be excluded from an earnings CDR and which should receive one. For example, RRB considers whether a beneficiary has any disability-related work expenses, such as the cost of special transportation or medication, which are deducted from any earnings, or if the beneficiary has reached full retirement age. (See fig. 2.) In addition, a beneficiary who returns to work or has earnings from employment is required to report that information to RRB, and the agency may initiate a CDR depending on the circumstances. If a potential overpayment is identified as a result of a CDR, the Disability Benefits Division refers the case to another division within RRB to calculate the overpayment amount.

Most Beneficiaries Are Not Subject to Medical CDRs, and Data Used to Identify Unreported Earnings and Potential Overpayments Are Outdated

RRB Completed CDRs for Slightly More Than 1 Percent of Disability Beneficiaries in Fiscal Years 2014-2016

Over the 3 years for which RRB was able to provide us with complete data, the agency completed 427 CDRs. This number represents CDRs for slightly more than 1 percent of the railroad workers who received disability benefits during that period, an average of about 35,000, including both occupational and T&P beneficiaries. Most of the reviews it completed from fiscal years 2014 through 2016 were medical CDRs, but earnings CDRs identified most of the ineligible beneficiaries and overpayments. Of the 427 CDRs completed, 209 were medical CDRs and 163 were earnings CDRs. In 55 cases, both a medical and an earnings CDR were completed.

Forty-three of the scheduled medical CDRs completed were based on medical improvement criteria. Another 166 of the medical CDRs completed were based on “high-risk” selection criteria that were developed after fraudulent activities came to light among Long Island Rail Road (LIRR) beneficiaries in the late 1990s through 2008. RRB uses the high-risk selection criteria to target occupational disability beneficiaries who share certain characteristics that are common to the employees who participated in the LIRR fraud scheme. Overall, RRB determined that about 86 percent of beneficiaries remained eligible for benefits as a result of all of the CDRs completed in fiscal years 2014-2016. (See fig. 3.)

Medical CDRs Identified Few Ineligible Beneficiaries and Overpayments

During fiscal years 2014-2016, RRB completed a total of 43 medical CDRs for beneficiaries–about 0.1 percent of disability beneficiaries–that were scheduled based on beneficiaries’ medical improvement category. Our analysis of RRB’s data and policies suggests that RRB completes few medical CDRs relative to the total number of disability beneficiaries because it has a high percentage of older disability beneficiaries who may not be subject to a medical CDR. According to the data provided by RRB, about 90 percent of individuals who received a disability payment in fiscal year 2016 were age 55 or older (see fig. 4), and RRB’s Disability Claims Manual states that at age 54½, a combination of medical and vocational factors, such as medical condition, age, and work experience, may preclude a return to work. More specifically, the manual instructs disability examiners to classify beneficiaries over age 54½ as “medical improvement not expected” because of the remote likelihood that they will be able to engage in medium or heavy work.

Scheduled medical CDRs resulted in few terminations and identified few overpayments. Data provided by RRB indicate that of the 43 medical CDRs completed during fiscal years 2014-2016, 3 ineligible beneficiaries were identified and 1 overpayment of $28,000 was identified and calculated. RRB determined that 40 of the 43 beneficiaries (93 percent) continued to meet the appropriate disability criteria for occupational or T&P disability, as applicable, and qualify for benefits (see sidebar). These results largely mirror RRB’s initial approval rates for disability benefits. In fiscal year 2016, 89 percent of all disability applicants were approved for benefits.

RRB Developed Criteria for Conducting Additional Medical CDRs to Target Cases at Risk for Fraud, but These CDRs Identified No Ineligible Beneficiaries in Two Years

In fiscal year 2015, RRB expanded the use of medical CDRs to include certain high-risk occupational disability cases that would previously only have been selected for a CDR if RRB received a report of medical recovery or identified earnings that could affect entitlement to benefits. As part of its Disability Program Improvement Plan, RRB developed selection criteria to target cases at high risk for potential fraud that could result in termination of benefits. According to RRB officials, the criteria for targeting these cases are based on characteristics common to the employees who participated in the LIRR fraud scheme. In order to fall within the high-risk group, a beneficiary must (1) have an occupational disability, (2) have an orthopedic or psychological impairment, (3) be under age 55, and (4) not have a disability freeze.

Despite these targeted criteria, the 166 high-risk CDRs completed in fiscal years 2015 and 2016 identified no ineligible beneficiaries and no overpayments. According to a senior RRB official, the agency is not yet ready to abandon its high-risk CDR effort, and it continues to consider these reviews as potentially effective. However, high-risk CDR outcomes raise questions about the value and benefit of RRB dedicating resources to conduct these additional reviews.

Earnings CDRs Identified the Greatest Number of Ineligible Beneficiaries and Overpayments, but Outdated Earnings Information Limits Their Effectiveness

Earnings CDRs resulted in a higher percentage of terminations and identified more overpayments than scheduled and high-risk medical CDRs combined. During fiscal years 2014-2016, RRB completed 163 earnings CDRs. Most of these earnings CDRs (127) were initiated as a result of RRB’s annual earnings policing effort, in which RRB’s beneficiary database is matched against Internal Revenue Service earnings data. Other CDRs were initiated as a result of self-reported earnings information from beneficiaries. Over this 3-year period, earnings CDRs identified 47 ineligible beneficiaries and terminated their benefits. During this same time period, earnings CDRs identified at least $970,550 in overpayments that had been calculated for CDRs completed during fiscal years 2014-2016.

However, earnings CDRs that were conducted may identify additional overpayments but RRB is slow to calculate overpayments. We determined that the overpayment data RRB provided for CDRs completed during 2014-2016 were incomplete. For example, a case file review of six randomly selected earnings CDRs completed in fiscal year 2016 found that in three of the cases, the Retirement and Survivor Benefits Division (RSBD), the office responsible for calculating overpayments, had not calculated the overpayments identified by those 2016 reviews as of July 2017. RRB officials acknowledged delays of a year or more in calculating overpayments for disability beneficiaries identified by CDRs, and that RRB lacks a standard time frame for doing so. The officials attributed the delays to competing priorities and staffing shortages within RSBD. RRB has no plans to establish a standard time frame for processing overpayments identified through CDRs.

Identifying and calculating overpayments in a timely manner are important to RRB’s long-term performance goal related to payment accuracy, as outlined in its strategic plan. Further, federal internal control standards state that transactions should be recorded promptly to maintain their relevance and value to management in controlling operations.

In addition, although RRB’s annual earnings policing effort has identified numerous beneficiaries with earnings over program limits as well as overpayments, the data RRB uses for its policing effort can be up to 2 years old. The data RRB uses to identify unreported earnings and determine whether it should initiate a CDR are based on outdated IRS earnings information. For example, income earned in calendar year 2014 that is filed with the IRS in 2015 would not become available for earnings policing until 2016.

Further, the earnings discovered during the course of a CDR may be even older than 2 years. Our review of the six earnings CDRs completed in fiscal year 2016 found the earned income in question ranged from 2011 through 2013. RRB officials acknowledged that the data it currently uses for its policing effort cause delays in identifying earnings. When overpayments are not identified in a timely manner, RRB’s ability to detect when a beneficiary is not eligible for benefits is hindered, thereby increasing the potential for lost federal dollars. In addition, the delay may also cause larger overpayments since undetected overpayments can accrue over several years.

We previously recommended that RRB explore options to obtain more timely earnings data for use in making disability benefit eligibility determinations, which includes CDRs. In response, RRB officials said one step they have recently taken is to use The Work Number, which includes payroll data from over 5,500 employers nationwide, on a case- by-case basis for CDRs to obtain more recent earnings information from employers for a specific beneficiary. In addition, RRB contacts employers directly to obtain earnings information needed for CDRs. However, according to a RRB official, IRS earnings data are currently the only source to which RRB has access for earnings policing that includes all of its disability beneficiaries.

RRB has considered conducting earnings policing using the Department of Health and Human Services’ quarterly earnings data from the National Directory of New Hires, which includes the most recent eight quarters of wages reported from all states. In its budget submissions for fiscal years 2017-2019, RRB included a legislative proposal seeking access to these quarterly earnings data, since access is limited by statute. Several federal agencies, including the Departments of the Treasury, Education, Housing and Urban Development, and the Social Security Administration, are currently authorized by law to use data from the National Directory of New Hires to verify program eligibility and detect and prevent overpayments. Providing RRB with similar access to more recent earnings data would enable it to identify potential overpayments sooner than is currently possible.

SSA has legal authority to access quarterly wage data from the National Directory of New Hires for the purpose of making disability benefit eligibility determinations, which includes CDRs. In March 2017, SSA implemented the Quarterly Earnings Project in which it matched certain Social Security Disability Insurance beneficiaries against these earnings data with the goal of reducing overpayments. According to SSA officials, the project identified beneficiaries with substantial earnings, on average, 1 year earlier when using quarterly wage data instead of earnings data from the IRS—the data RRB currently uses to conduct its annual earnings match. SSA officials project that the Quarterly Earnings Project will achieve an estimated $10.3 million in savings and benefit terminations in 22 percent of the roughly 10,000 cases selected for review in fiscal year 2017.

RRB’s Oversight of Its CDR Program Has Focused on High- Risk Reviews Rather Than Overall Program Data

RRB Has Reviewed High- Risk CDRs, but Outcomes Call This Effort into Question

RRB’s Program Evaluation and Management Services (PEMS), which is tasked with conducting reviews to ensure efficient program performance, has conducted two internal reviews of the high-risk medical CDRs since they were first implemented in 2015. PEMS concluded in its 2016 report that conducting high-risk CDRs based solely on the likelihood of medical improvement demonstrated no return on investment. PEMS officials recommended that the Disability Benefits Division focus its resources on investigating non-reported work and earnings rather than on developing medical evidence; however, RRB continues to dedicate resources to developing medical evidence for high-risk CDRs, and a senior RRB official said the agency is not ready to abandon its high-risk CDR effort. RRB officials said they plan to track certain annual measures for high-risk CDRs, such as the number of cases referred to the OIG for potential fraud, CDR outcomes (continuances, suspensions, and terminations), and any overpayments identified.

Our findings and PEMS’s 2016 conclusions indicate that these high-risk medical CDRs have not been effective in identifying ineligible beneficiaries, or identifying potential fraud. High initial approval rates for occupational disability benefits—over 96 percent for fiscal years 2008- 2016—may be an indication that high-risk CDRs for occupational beneficiaries would result in most beneficiaries continuing to qualify for benefits, since the same disability criteria are used to evaluate medical condition for initial decisions and CDRs. By continuing to conduct high- risk CDRs, RRB may be expending resources that could be used for other purposes that are more effective in identifying ineligible beneficiaries.

RRB Does Not Routinely Compile and Analyze CDR Program Data for All CDRs

Aside from RRB’s efforts to oversee its high-risk medical reviews, it does not routinely analyze program data for its CDR operations as a whole. The lack of routine data collection and analysis limits its ability to identify potential gaps in oversight and monitor program performance. RRB officials said compiling comprehensive information for the CDR program can be challenging because CDR data are housed in multiple systems, some of which use outdated software and are not compatible with each other. For example, information related to CDR overpayments is housed in at least three separate systems. Further, according to RRB officials, some case information is only available in paper files.

RRB has taken some steps to improve its ability to access information, such as converting its paper files to electronic images, but the information in the images cannot easily be analyzed. RRB was able to compile data for fiscal years 2014-2016 for our review that made it possible for us to analyze different aspects of the CDR program, such as the number of medical and earnings CDRs completed each year, the amount of overpayments identified as a result of CDRs, and CDR outcomes. However, RRB was unable to provide complete historical data for CDRs completed before fiscal year 2014. If RRB routinely compiled and analyzed these data for its own purposes, it could better monitor CDR program performance. This would be consistent with federal internal control standards, which state that management should use program data for effective program monitoring.

Routinely compiling and analyzing CDR program data would also allow RRB to identify potential gaps in oversight. For example, our analysis of the data provided by RRB indicated that 10 percent of the 427 cases for which it completed a CDR during fiscal years 2014-2016 lacked a valid initial medical improvement category—medical improvement expected, possible, or not expected—which is assigned when beneficiaries are first awarded benefits. Since RRB schedules medical CDRs based on medical improvement category information, and we found that medical improvement category data are incomplete for 10 percent of the CDRs completed during fiscal years 2014-2016, this raises questions as to whether RRB is scheduling and conducting medical CDRs for everyone it should be. RRB officials said the only way to verify a beneficiary’s medical improvement category is to perform an individual query in the CDR Call-Up program or check the paper files, which could be very time- consuming and labor-intensive to do for all beneficiaries.

RRB also lacks data on the total number of beneficiaries currently in each medical improvement category. Without these data, RRB cannot anticipate how many medical CDRs it should expect to conduct and when. Federal internal control standards state that management should use quality information to make informed decisions, and that quality information is current, complete, and accurate.

RRB’s ability to monitor the performance of its CDR program is also limited because it does not track all costs or benefits of conducting CDRs. For example, RRB officials told us they do not analyze certain program data, such as administrative costs and recovered overpayments for CDRs. Analyzing these program data would enable RRB to compare any savings produced by CDRs against the cost of administering them. RRB’s strategic plan states that the agency measures the efficiency of its agency-wide program integrity efforts by comparing any savings they produce against the cost of administering the activities. According to the plan, program integrity efforts that can identify savings include computer matching to prevent payments to deceased beneficiaries and referring suspected fraud to the OIG. In its fiscal year 2017 Performance and Accountability Report, RRB reported a return on investment of $4.18 for each dollar spent on combined program integrity efforts in fiscal year 2016. However, we do not know how CDRs contributed to this return on investment or the savings resulting from CDRs specifically.

Conclusions

As a steward of tax dollars, it is important that RRB take all necessary steps to operate and manage its disability program effectively and efficiently, while minimizing overpayments. RRB’s continued reliance on outdated earnings information to identify beneficiaries who, at the time a CDR is conducted, may no longer be eligible for benefits, increases the likelihood of making improper benefit payments and having to try to recover the money in the future. In addition, even for those overpayments that RRB identifies, it lacks a standard for processing them in a timely manner, which increases the potential loss of federal dollars. Furthermore, despite a RRB report that high-risk medical CDRs have not been effective, the agency expends resources on these reviews that could be used for other purposes that are more effective in identifying ineligible beneficiaries.

RRB’s lack of routine data collection and analysis hampers its ability to monitor program performance and determine what changes, if any, should be made to improve the CDR program, including determining the number of beneficiaries in each medical improvement category and the costs and benefits of conducting the various types of reviews. While paper files and disparate data systems present challenges to collecting and analyzing program data and may hinder oversight efforts, RRB could be doing more with the data it has to identify potential gaps in oversight.

Matter for Congressional Consideration

To improve RRB’s ability to make accurate disability benefit eligibility determinations, including CDRs, and to decrease the potential for making improper payments, Congress should consider granting RRB access to the Department of Health and Human Services’ quarterly earnings information from the National Directory of New Hires database. (Matter for Consideration 1)

Recommendations for Executive Action

To enhance RRB’s ability to manage and oversee its CDR program, we are making the following three recommendations to the Railroad Retirement Board: RRB should develop a standard for the timely processing of disability program overpayments identified through CDRs. (Recommendation 1)

RRB should consider whether to reallocate resources used for high-risk CDRs to other CDR efforts that produce more effective outcomes. (Recommendation 2)

RRB should routinely compile and analyze CDR program data, such as the number of cases selected for review, the number of beneficiaries in each medical improvement category, outcomes, and the costs and benefits of conducting CDRs, to improve program oversight. (Recommendation 3)

Agency Comments and Our Evaluation

We provided a draft of this report to RRB for review and comment. RRB provided written comments, which are reproduced in appendix II. The agency also provided additional technical comments, which have been incorporated as appropriate. RRB agreed with all three of the recommendations and noted that it has already taken initial steps to implement them.

We are sending copies of this report to the appropriate congressional committees, the Railroad Retirement Board, and other interested parties. In addition, the report will be will be available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact me at (202) 512-7215 or curdae@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III.

Appendix I: Railroad Retirement Board Funding and Expenditures, Fiscal Years 2007 Through 2016

Railroad Retirement Board (RRB) Funding

In fiscal years 2007 through 2016, RRB received, on average, approximately $11.6 billion annually from multiple sources to fund its programs. RRB’s budget in fiscal year 2016, the most recent year for which data are available, was $12.4 billion. (See table 1.)

Railroad retirement, survivor, disability, unemployment, and sickness benefit payroll taxes are the primary funding source for RRB and totaled $5.9 billion in fiscal year 2016. In fiscal years 2007-2016, these taxes averaged $5.2 billion annually. Railroad employers and employees pay Tier I taxes, which are the same as taxes levied on Social Security- covered employers and workers. The taxes fund benefits similar to Social Security retirement and disability. Employers and employees also pay Tier II taxes to finance additional railroad retirement benefits. According to RRB data, Tier I and Tier II taxes for fiscal year 2016 amounted to $2.8 billion and $3.1 billion, respectively. Railroad employers also paid approximately $117.2 million in unemployment insurance taxes in fiscal year 2016.

The second major source of RRB funding consists of transfers from the Social Security trust funds under a financial interchange between the two systems. The financial interchange is intended to place the Social Security Old-Age and Survivors Insurance Trust Fund and the federal Hospital Insurance Trust Fund in the same condition they would have been in had railroad employees been covered by the Social Security Act and Federal Insurance Contributions Act, and the Railroad Retirement Act had not been enacted. The financial interchange calculation involves computing the amount of Social Security taxes that would have been collected on railroad employment and computing the amount of benefits which Social Security would have paid to railroad retirement beneficiaries during the same fiscal year. When benefit reimbursements exceed payroll taxes, the difference, with an allowance for interest and administrative expenses, is transferred from the Social Security Trust Funds to RRB. If taxes exceed benefit reimbursements, which has not happened since 1951, a transfer would be made in favor of the Social Security Trust Funds. According to RRB data, the net financial transfer to the Social Security Equivalent Benefit Account during fiscal year 2016 amounted to about $4.1 billion; in fiscal years 2007-2016, these transfers averaged $4.0 billion annually.

The third major source of RRB funding is transfers from the National Railroad Retirement Investment Trust, the trust fund that holds assets to help pay a portion of RRB benefits. The Trust was established pursuant to Section 105 of the Railroad Retirement and Survivors’ Improvement Act of 2001, and is the vehicle for investing RRB retirement benefit assets in non-government securities. Under the Trust’s investment guidelines, assets are invested in both government securities and private equities, unlike the Social Security Trust Funds, which are only invested in government securities. The Trust also provided for the transfer of excess RRB retirement, survivor, and disability benefit payroll taxes that are not needed to pay benefits to the Trust for investment, and for transfers from the Trust to the Treasury to assist the RRB in meeting its benefit obligations. The Trust has not received transfers from the RRB since the end of fiscal year 2004. During fiscal year 2016, however, the Trust transferred a total of $1.4 billion to the Treasury for payment of RRB benefit obligations; for fiscal years 2007-2016, these transfers averaged $1.6 billion annually. According to RRB data, the value of Trust-managed assets at the end of fiscal year 2016 was $25.1 billion.

The fourth major source of RRB funding is appropriations. According to RRB officials, most of these appropriations are derived from the taxation of railroad retiree benefits and primarily fund benefit payments. These appropriations also fund specific efforts such as administrative costs. In fiscal year 2016, RRB received $790.6 million in federal appropriations; for fiscal years 2007-2016, RRB’s annual appropriation averaged $655.4 million.

Railroad Retirement Board Expenditures

In fiscal years 2007-2016, RRB expended, on average, approximately $11.6 billion annually to fund its programs. (See table 2.)

RRB’s expenditures in fiscal year 2016, the most recent year for which data are available, were $12.8 billion, which included approximately $12.5 billion for benefit payments, $156.0 million for salaries and expenses, and $98.0 million for interest expenses due to borrowing from Treasury for the financial interchange.

Railroad Retirement System Solvency

By law, RRB is required to prepare an annual report to the President and Congress containing a 5-year projection on revenues to and payments from the Railroad Retirement Account (RRA). In its June 2017 report, RRB projected that cash flow problems would not occur during the 25- year projection period (calendar years 2017-2041). The report also recommended no change in employer and employee tax rates and no diversion of taxes from the RRA to the Railroad Unemployment Insurance Account (RUIA).

Appendix II: Comments from the Railroad Retirement Board

Appendix III: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

In addition to the contact named above, Mark Glickman (Assistant Director), Arthur T. Merriam Jr. (Analyst-In-Charge), Meredith Moore, and Jill Yost made significant contributions to this report. Also contributing to this report were Daniel Concepcion, Erin Godtland, Joel Green, Nicole Jarvis, David Lehrer, Emei Li, Olivia Lopez, Sheila McCoy, Phillip McIntyre, Jean McSween, Mimi Nguyen, James Rebbe, Anjali Tekchandani, Frank Todisco, and Kathleen van Gelder.

Related GAO Products

Social Security Disability: SSA Could Increase Savings by Refining Its Selection of Cases for Disability Review. GAO-16-250. Washington, D.C.: February 11, 2016.

Railroad Retirement Board: Actions Needed to Reduce Continued Risk of Fraud and Improper Payments. GAO-15-535T. Washington, D.C.: May 1, 2015.

Railroad Retirement Board: Total and Permanent Disability Program at Risk of Improper Payments. GAO-14-418. Washington, D.C.: June 26, 2014.

Use of the Railroad Retirement Board Occupational Disability Program across the Rail Industry. GAO-10-351R. Washington, D.C.: February 4, 2010.

Railroad Retirement Board: Review of Commuter Railroad Occupational Disability Claims Reveals Potential Program Vulnerabilities. GAO-09-821R. Washington, D.C.: September 9, 2009.