Establishes a Railroad Retirement Trust Fund and a Railroad Retirement Investment Trust to manage and invest Fund assets. Abolishes the Railroad Retirement Supplemental Annuity Account and provides for transfer of its funds to the Fund. Provides for transfer to the Fund of certain portions of the Railroad Retirement Account and of Social Security Equivalent Benefit account funds. Transfers to the disbursing agent from the Dual Benefits Payments Account the amount necessary to make dual benefit payments.
Requires the Railroad Retirement Board (RRB) to calculate the ratio of assets to benefits to determine annual tier II tax rates for employers, employee representatives, and employees.
Amends the Internal Revenue Code to exempt the Fund from taxation. Repeals a supplemental annuity tax that railroad employers pay to finance a benefit for long-time rail employees. Provides for adjustments to railroad employers, employee representatives, and employee tier II tax rates.
[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 697 Introduced in Senate (IS)]
107th CONGRESS
1st Session
S. 697
To modernize the financing of the railroad retirement system and to
provide enhanced benefits to employees and beneficiaries.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
April 4, 2001
Mr. Hatch (for himself, Mr. Baucus, Mr. Hagel, Mr. Rockefeller, Mr.
Craig, Mr. Bingaman, Mr. Crapo, Mrs. Lincoln, Mr. Brownback, Mr.
Torricelli, Mr. Warner, Mr. Conrad, Mr. Roberts, Mr. Kerry, Mr. Smith
of Oregon, Mr. Daschle, Ms. Collins, Mr. Breaux, Mr. Hutchinson, Ms.
Mikulski, Ms. Landrieu, Mr. Carper, Mr. Cleland, Mr. Schumer, Mr.
Dorgan, Mr. Biden, Mrs. Carnahan, Mr. Nelson of Nebraska, Ms. Stabenow,
Mr. Wellstone, Mr. Dayton, Mr. Sarbanes, Mr. Durbin, Mr. Bayh, and Mr.
Miller) introduced the following bill; which was read twice and
referred to the Committee on Finance
_______________________________________________________________________
A BILL
To modernize the financing of the railroad retirement system and to
provide enhanced benefits to employees and beneficiaries.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Railroad
Retirement and Survivors' Improvement Act of 2001''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; table of contents.
TITLE I--AMENDMENTS TO RAILROAD RETIREMENT ACT OF 1974
Sec. 101. Expansion of widow's and widower's benefits.
Sec. 102. Retirement age restoration.
Sec. 103. Vesting requirement.
Sec. 104. Repeal of railroad retirement maximum.
Sec. 105. Investment of railroad retirement assets.
Sec. 106. Elimination of supplemental annuity account.
Sec. 107. Transfer authority revisions.
Sec. 108. Annual ratio projections and certifications by the Railroad
Retirement Board.
TITLE II--AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986
Sec. 201. Amendments to the Internal Revenue Code of 1986.
Sec. 202. Exemption from tax for Railroad Retirement Investment Trust.
Sec. 203. Repeal of supplemental annuity tax.
Sec. 204. Employer, employee representative, and employee tier 2 tax
rate adjustments.
TITLE I--AMENDMENTS TO RAILROAD RETIREMENT ACT OF 1974
SEC. 101. EXPANSION OF WIDOW'S AND WIDOWER'S BENEFITS.
(a) In General.--Section 4(g) of the Railroad Retirement Act of
1974 (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 provided under
this section for a widow or widower is less than the widow's or
widower's initial minimum amount computed pursuant to paragraph (ii) of
this subdivision, the unreduced annuity shall be increased to that
initial minimum amount. For the purposes of this subdivision, the
unreduced annuity is the annuity without regard to any deduction on
account of work, without regard to any reduction for entitlement to an
annuity under section 2(a)(1) of this Act, without regard to any
reduction for entitlement to a benefit under title II of the Social
Security Act, and without regard to any reduction for entitlement to a
public service pension pursuant to 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 entitled to a
widow's or widower's annuity under section 2(d)(1)(ii) of this Act
becomes entitled to a widow's or widower'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 the first day of the first month that begins
more than 30 days after the date of enactment of this Act, and
shall apply to annuity amounts accruing for months after the
effective date 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 Retirement
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 before the effective
date.--In applying the amendment made by this section to
annuities awarded before the effective date, the calculation of
the initial minimum amount under 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.
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 sentence: ``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 repealed.
(d) Effective Dates.--
(1) Generally.--Except as provided in paragraph (2), the
amendments made by this section shall apply to annuities that
begin to accrue on or after January 1, 2002.
(2) Exception.--The amount of the annuity provided for a
spouse under section 4(a) of the Railroad 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 employment record the spouse annuity is based
was computed 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 purposes of
paragraphs (i), (iii), and (v), five years of service, all of
which accrues after December 31, 1995)'' after ``ten years of
service''; and
(2) by adding at the end the following new subdivision:
``(4) An individual who is entitled to an annuity under paragraph
(v) of subdivision (1), but who does not have at least ten years of
service, shall, prior to the month in which the individual attains age
62, be entitled only to an annuity amount computed under section 3(a)
of this Act (without regard to section 3(a)(2) of this Act) or section
3(f)(3) of this Act. Upon attainment of age 62, such an individual may
also be entitled to an annuity amount computed under section 3(b), but
such annuity amount shall be reduced for early retirement in the same
manner as if the individual were entitled to an annuity under section
2(a)(1)(iii).''.
(b) Computation Rule for Individuals' Annuities.--Section 3(a) of
the Railroad Retirement Act of 1974 (45 U.S.C. 231b(a)), as amended by
section 102 of this Act, is further amended by adding at the end the
following new subdivision:
``(3) If an individual entitled to an annuity under section
2(a)(1)(i) or (iii) of this Act on the basis of less than ten years of
service is entitled to a benefit under section 202(a), section 202(b),
or section 202(c) of the Social Security Act which began to accrue
before the annuity under section 2(a)(1)(i) or (iii) of this Act, the
annuity amount provided such individual under this subsection, shall be
computed as though the annuity under this Act began to accrue on the
later of (A) the date on which the benefit under section 202(a),
section 202(b), or section 202(c) of the Social Security Act began, or
(B) the date on which the individual first met the conditions for
entitlement to an age reduced annuity under this Act other than the
conditions set forth in sections 2(e)(1) and 2(e)(2) of this Act and
the requirement that an application be filed.''.
(c) Survivors' Annuities.--Section 2(d)(1) of the Railroad
Retirement Act of 1974 (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
Security Act which began to accrue before the annuity under section
2(c)(1)(ii)(A), section 2(c)(1)(ii)(C), section 2(c)(2), or section
2(c)(4) of this Act, the annuity amount provided under this subsection
shall be computed as though the annuity under this Act began to accrue
on the later of (A) the date on which the benefit under section 202(a),
section 202(b), or section 202(c) of the Social Security Act began or
(B) the first date on which the annuitant met the conditions for
entitlement to an age reduced annuity under this Act other than the
conditions set forth in sections 2(e)(1) and 2(e)(2) of this Act and
the requirement that an application be filed.''.
(f) Application Deeming Provision.--Section 5(b) of the Railroad
Retirement Act of 1974 (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 divorced spouse annuity on the basis of the employment
record of an employee who will have completed less than ten years of
service shall be deemed to be an application for any benefit to which
such applicant may be entitled under this Act or section 202(a),
section 202(b), or section 202(c) of the Social Security Act. An
application filed with the Board for an annuity on the basis of the
employment record of an employee who will have completed ten years of
service shall, unless the applicant specified otherwise, be deemed to
be an application for any benefit to which such applicant may be
entitled under this Act or title II of the Social Security Act.''.
(g) Crediting Service Under the Social Security Act.--Section 18(2)
of the Railroad Retirement Act of 1974 (45 U.S.C. 231q(2)) is amended--
(1) by inserting ``(or less than five years of service, all
of which accrues after December 31, 1995)'' after ``ten years
of service'' each place it appears; and
(2) by inserting ``(or five or more years of service, all
of which accrues after December 31, 1995)'' after ``ten or more
years of service''.
(h) Automatic Benefit Eligibility Adjustments.--Section 19 of the
Railroad Retirement Act of 1974 (45 U.S.C. 231r) is amended--
(1) by inserting ``(or five or more years of service, all
of which accrues after December 31, 1995)'' after ``ten years
of service'' in subsection (c); and
(2) by inserting ``(or five or more years of service, all
of which accrues after December 31, 1995)'' after ``ten years
of service'' in subsection (d)(2).
(i) Conforming Amendments.--
(1) Section 6(e)(1) of the Railroad Retirement Act of 1974
(45 U.S.C. 231e(1)) is amended by inserting ``(or five or more
years of service, all of which accrues after December 31,
1995)'' after ``ten years of service''.
(2) Section 7(b)(2)(A) of the Railroad Retirement Act of
1974 (45 U.S.C. 231f(b)(2)(A)) is amended by inserting ``(or
five or more years of service, all of which accrues after
December 31, 1995)'' after ``ten years of service''.
(3) Section 205(i) of the Social Security Act (42 U.S.C.
405(i)) is amended by inserting ``(or five or more years of
service, all of which accrues after December 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 inserting ``(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 subsection,''.
(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, 2002, and shall apply to annuity amounts accruing
for months after December 2001.
SEC. 105. INVESTMENT OF RAILROAD RETIREMENT ASSETS.
(a) Establishment of Railroad Retirement Investment 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 Retirement 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
applicable to such trusts. The Trust shall manage and invest
its assets in the manner set forth in this subsection.
``(2) Not a federal agency or instrumentality.--The Trust
is not a department, agency, or instrumentality of the
Government of the United States and shall not be subject to
title 31, United States Code.
``(3) Board of trustees.--
``(A) Generally.--The Trust shall have a Board of
Trustees, consisting of 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 members, 3 shall
represent 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 expertise in the management of
financial investments and pension plans. No member of
the Railroad Retirement Board shall be eligible to be a
member of the Board of Trustees.
``(C) Terms.--Except as provided in this
subparagraph, each member shall be appointed for a 3-
year term. The initial members appointed under this
paragraph shall be divided into equal groups so nearly
as may be, of which one group will be appointed for a
1-year term, one for a 2-year term, and one for a 3-
year term. A vacancy in the Board of Trustees shall not
affect the powers of the Board of Trustees and shall be
filled in the same manner as the selection of the
member whose departure caused the vacancy. Upon the
expiration of a term of a member of the Board of
Trustees, that member shall continue to serve until a
successor is appointed.
``(4) Powers of the board of trustees.--The Board of
Trustees shall--
``(A) retain independent advisers to assist it in
the formulation and adoption of its investment
guidelines;
``(B) retain independent investment managers to
invest the assets of the Trust in a manner 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 assets 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 trustees.--The Trust
and each member of the Board of Trustees shall
discharge their duties with respect to the assets of
the Trust solely in the interest of the Railroad
Retirement Board and through it, the participants and
beneficiaries of the programs funded under this Act--
``(i) for the exclusive purpose of--
``(I) providing benefits to
participants and their beneficiaries;
and
``(II) defraying reasonable
expenses of administering the functions
of the Trust;
``(ii) with the care, skill, prudence, and
diligence under the circumstances then
prevailing that a prudent person acting in a
like capacity and familiar with such matters
would use in the conduct of an enterprise of a
like character and with like aims;
``(iii) by diversifying investments so as
to minimize the risk of large losses, unless
under the circumstances it is clearly prudent
not to do so; and
``(iv) in accordance with Trust governing
documents and instruments insofar as such
documents and instruments are consistent with
this Act.
``(B) Prohibitions with respect to members of the
board of trustees.--No member of the Board of Trustees
shall--
``(i) deal with the assets of the 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 insurance.--Any
provision in an agreement or instrument that purports
to relieve a trustee from responsibility or liability
for any responsibility, obligation or duty under this
Act shall be void: Provided, however, That nothing
shall preclude--
``(i) the Trust from purchasing insurance
for its trustees or for itself to cover
liability or losses occurring by reason of the
act or omission of a trustee, if such insurance
permits recourse by the insurer against the
trustee in the case of a breach of a fiduciary
obligation by such trustee;
``(ii) a trustee from purchasing insurance
to cover liability under this section from and
for his own account; or
``(iii) an employer or an employee
organization from purchasing insurance to cover
potential liability of one or more trustees
with respect to their fiduciary
responsibilities, obligations, and duties under
this section.
``(D) Bonding.--Every trustee and every person who
handles funds or other property of the 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 handled. In no case
shall such bond be less than $1,000 nor more
than $500,000, except that the Railroad
Retirement Board, after consideration of the
record, may prescribe an amount in excess of
$500,000, subject to the 10 percent 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 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 official,
with respect to whom the requirements of this
subsection have not been met.
``(iii) It shall be unlawful for any person
to procure any bond required by this subsection
from any surety or other company or through any
agent or broker in whose business operations
such person has any control or significant
financial interest, direct or indirect.
``(E) Audit and report.--
``(i) The Trust shall annually engage an
independent qualified public accountant to
audit the financial statements of the 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
position;
``(II) a statement of operations;
``(III) a statement of cash flows;
``(IV) a statement on internal
accounting and administrative control
systems;
``(V) the report resulting from an
audit of the financial statements of
the Trust conducted under clause (i);
and
``(VI) any other comments and
information necessary to inform the
Congress about the operations and
financial condition of the Trust.
``(iii) The Trust shall provide the
President, the Railroad Retirement Board, and
the Director of the Office of Management and
Budget a copy of the management report when it
is submitted to Congress.
``(F) Enforcement.--The Railroad Retirement Board
may bring a civil action--
``(i) to enjoin any act or practice by the
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) Application of fiduciary standards to railroad
retirement board.--
``(A) In general.--The provisions of paragraph
(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 professional staff, and contract with
outside advisers, including the Railroad Retirement Board, to
provide legal, accounting, investment advisory or other
services necessary for the proper administration of this
subsection. In the case of contracts with investment advisory
services, compensation for such services may be on a fixed
contract fee basis or on such other terms and conditions as are
customary for such services.
``(8) Quorum.--Five members of the Board of Trustees
constitute a quorum to do business. Investment guidelines must
be adopted by a unanimous vote of the entire Board of Trustees.
All other decisions of the Board of Trustees shall be decided
by a majority vote of the quorum present. All decisions of the
Board of Trustees shall be entered upon the records of the
Board of Trustees.
``(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 Governing 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 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 first day of the first month that begins more than 30
days after the date of enactment of this Act.
SEC. 106. ELIMINATION OF SUPPLEMENTAL ANNUITY ACCOUNT.
(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 Railroad 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 repealed.
(c) Amendment to Railroad Retirement Account.--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
(B) direct the Secretary of the Treasury to
transfer such funds to the Railroad Retirement
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 Account 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 Railroad Retirement Investment Trust and from time to time
thereafter, direct the Secretary of the Treasury to transfer, in such
manner as will maximize the investment returns to the Railroad
Retirement system, that portion of the Railroad Retirement Account that
is not needed to pay current administrative expenses of the Board to
the Railroad Retirement Investment Trust. The Secretary shall make that
transfer.''.
(b) Transfers From the Railroad Retirement Investment Trust.--
Section 15 of the Railroad Retirement Act of 1974 (45 U.S.C. 231n), as
amended by subsection (a), is further amended by adding after
subsection (k) the following new subsection:
``(l) Railroad Retirement Investment Trust.--The 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 Account.--
(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:
``(2) Upon establishment of the Railroad Retirement 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 required to be paid from
that Account to the Railroad Retirement Investment Trust, and the
Secretary shall make that transfer. Any balance transferred under this
paragraph shall be used by the Railroad Retirement 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 pursuant to chapter 31 of title 31, United States Code.
The proceeds of sales of, and the interest income from, such
obligations shall be used by the Trust only to pay benefits under this
Act.''.
(2) Transfers to disbursing agent.--Section 15A(c)(1) of
the Railroad Retirement Act of 1974 (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.''.
(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 second 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 Account to the disbursing agent under section 7(b)(4) amounts
necessary to pay benefits payable from that Account.''.
(e) Certification by the Board and Payment.--Paragraph (4) of
section 7(b) of the Railroad Retirement Act of 1974 (45 U.S.C.
231f(b)(4)) is amended to read as follows:
``(4)(A) The Railroad Retirement Board, after consultation with the
Board of Trustees of the Railroad Retirement Investment Trust and the
Secretary of the Treasury, shall enter into an arrangement with a
nongovernmental financial institution to serve as disbursing agent for
benefits payable under this Act who shall disburse consolidated
benefits under this Act to each recipient. Pending the taking effect of
that arrangement, benefits shall be paid as under the law in effect
prior to the date of enactment of 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 Treasury shall transfer those amounts;
``(ii) to the Board of Trustees of the Railroad Retirement
Investment Trust the amounts required to be transferred from
the Railroad Retirement Investment Trust to the disbursing
agent to make payments of benefits and the Board of Trustees
shall transfer those amounts; and
``(iii) to the disbursing agent the name and address of
each individual entitled to receive a payment, the amount of
such payment, and the time at which the payment should be
made.''.
(f) Benefit Payments.--Section 7(c)(1) of the Railroad Retirement
Act of 1974 (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 from the Railroad Retirement
Investment Trust or the Social Security Equivalent Benefit
Account, as the case may be''; and
(2) by inserting ``by the disbursing agent under subsection
(b)(4) from money transferred to it'' after ``Public Law 93-445
shall be made''.
(g) Transitional Rule for Existing Obligation.--In making transfers
under sections 15(k) and 15A(d)(2) of the Railroad Retirement Act of
1974, as amended by subsections (a) and (c), respectively, the Railroad
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
Railroad Retirement Investment Trust may hold to maturity any
obligations so received or may redeem them prior to maturity, as the
Trust deems appropriate.
SEC. 108. ANNUAL RATIO PROJECTIONS AND CERTIFICATIONS BY THE RAILROAD
RETIREMENT BOARD.
(a) Projections.--Section 22(a)(1) of the Railroad Retirement Act
of 1974 (45 U.S.C. 231u(a)(1)) is amended--
(1) by inserting after the first sentence the following new
sentence: ``On or before May 1 of each year beginning in 2003,
the Railroad Retirement Board shall compute its projection of
the account benefits ratio and the average account benefits
ratio (as defined by section 3241(c) of the Internal Revenue
Code of 1986) for each of the next succeeding five fiscal
years.''; and
(2) by striking ``the projection prepared pursuant to the
preceding sentence'' and inserting ``the projections prepared
pursuant to the preceding two sentences''.
(b) Certifications.--The Railroad Retirement Act of 1974 (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 Certification.--On or before
November 1, 2003, 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) 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.
``(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 amendment to, or repeal of, a
section or other provision, the reference shall be considered to be
made to a section or other provision of the Internal Revenue Code of
1986.
SEC. 202. EXEMPTION FROM TAX FOR RAILROAD RETIREMENT INVESTMENT TRUST.
Subsection (c) of section 501 is amended by adding at the end the
following new paragraph:
``(28) The Railroad Retirement Investment Trust established
under section 15(j) of the Railroad Retirement Act of 1974.''.
SEC. 203. REPEAL OF SUPPLEMENTAL ANNUITY TAX.
(a) Repeal of Tax on Employee Representatives.--Section 3211 is
amended by striking subsection (b).
(b) Repeal of Tax on Employers.--Section 3221 is amended by
striking subsections (c) and (d) and by redesignating subsection (e) as
subsection (c).
(c) Effective Date.--The amendments made by this section shall
apply to calendar years beginning after December 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.
``(2) Applicable percentage.--For purposes of paragraph
(1), the term `applicable percentage' means--
``(A) 15.6 percent in the case of compensation paid
during 2002,
``(B) 14.2 percent in the case of compensation paid
during 2003, and
``(C) in the case of compensation paid during any
calendar year after 2003, the percentage determined
under section 3241 for such calendar year.''.
(b) Rate of Tax on Employee Representatives.--Section 3211, as
amended by section 203, is amended by striking subsection (a) and
inserting the following new subsections:
``(a) Tier 1 Tax.--In addition to other taxes, there is hereby
imposed on the income of each employee representative a tax equal to
the applicable percentage of the compensation received during any
calendar year by such employee representative for services rendered by
such employee representative. For purposes of the preceding sentence,
the term `applicable percentage' means the percentage equal to the sum
of the rates of tax in effect under subsections (a) and (b) of section
3101 and subsections (a) and (b) of section 3111 for the calendar year.
``(b) Tier 2 Tax.--
``(1) In general.--In addition to other taxes, there is
hereby imposed on the income of each employee representative a
tax equal to the applicable percentage of the compensation
received during any calendar year by such employee
representatives for services rendered by such employee
representative.
``(2) Applicable percentage.--For purposes of paragraph
(1), the term `applicable percentage' means--
``(A) 14.75 percent in the case of compensation
received during 2002,
``(B) 14.20 percent in the case of compensation
received during 2003, and
``(C) in the case of compensation received during
any calendar year after 2003, the percentage determined
under section 3241 for such calendar year.
``(c) Cross Reference.--
``For application of different
contribution bases with respect to the taxes imposed by subsections (a)
and (b), see section 3231(e)(2).''.
(c) Rate of Tax on Employees.--Subsection (b) of section 3201 is
amended to read as follows:
``(b) Tier 2 Tax.--
``(1) In general.--In addition to other taxes, there is
hereby imposed on the income of each employee a tax equal to
the applicable percentage of the compensation received during
any calendar year by such employee for services rendered by
such employee.
``(2) Applicable percentage.--For purposes of paragraph
(1), the term `applicable percentage' means--
``(A) 4.90 percent in the case of compensation
received during 2002 or 2003, and
``(B) in the case of compensation received during
any calendar year after 2003, the percentage determined
under section 3241 for such calendar year.''.
(d) Determination of Rate.--Chapter 22 is amended 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 account
benefits ratio.
``SEC. 3241. DETERMINATION OF TIER 2 TAX RATE BASED ON AVERAGE ACCOUNT
BENEFITS RATIO.
``(a) In General.--For purposes of sections 3201(b), 3211(b), and
3221(b), the applicable percentage for any calendar year is the
percentage determined in accordance with the table in subsection (b).
``(b) Tax Rate Schedule.--
------------------------------------------------------------------------
Average account benefits ratio Applicable
----------------------------------- percentage for Applicable
sections 3211(b) percentage for
At least But less than and 3221(b) section 3201(b)
------------------------------------------------------------------------
2.5 22.1 4.9
2.5 3.0 18.1 4.9
3.0 3.5 15.1 4.9
3.5 4.0 14.1 4.9
4.0 6.1 13.1 4.9
6.1 6.5 12.6 4.4
6.5 7.0 12.1 3.9
7.0 7.5 11.6 3.4
7.5 8.0 11.1 2.9
8.0 8.5 10.1 1.9
8.5 9.0 9.1 0.9
9.0 8.2 0
------------------------------------------------------------------------
``(c) Definitions Related to Determination of Rates of Tax.--
``(1) Average account benefits ratio.--For purposes of this
section, the term `average account benefits ratio' means, with
respect to any calendar year, the average determined by the
Secretary of the account benefits ratios for the 10 most recent
fiscal years ending before such calendar year. If the amount
determined under the preceding sentence is not a multiple of
0.1, such amount shall be increased to the next highest
multiple of 0.1.
``(2) Account benefits ratio.--For purposes of this
section, the term `account benefits ratio' means, with respect
to any fiscal year, the amount determined by the Railroad
Retirement Board by dividing the fair market value of the
assets in the Railroad Retirement Account and of the Railroad
Retirement Investment Trust (and for years before 2002, 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.--Not later than December 1 of each calendar year, the
Secretary shall publish a notice in the Federal Register of the rates
of tax determined under this section which are applicable for the
following calendar year.''.
(e) Conforming Amendments.--
(1) Section 24(d)(3)(A)(iii) is amended by striking
``section 3211(a)(1)'' and inserting ``section 3211(a)''.
(2) Section 72(r)(2)(B)(i) is amended by striking ``section
3211(a)(2)'' and inserting ``section 3211(b)''.
(3) Paragraphs (2)(A)(iii)(II) and (4)(A) of section
3231(e) 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.''.
(f) Effective Date.--The amendments made by this section shall
apply to calendar years beginning after December 31, 2001.
<all>
Introduced in Senate
Sponsor introductory remarks on measure. (CR S3448-3450)
Read twice and referred to the Committee on Finance.
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