Retirement and Unemployment Insurance Programs of the Railroad Retirement Board

Testimony was given concerning proposed legislation that would improve the financial condition of the railroad retirement and unemployment programs. GAO also described how the system operates and how it is tied to social security and discussed past GAO proposals to improve the railroad retirement program's financial condition. The railroad retirement program involves benefits similar to those available under social security, as well as a private industry pension plan available to those who, prior to 1975, had qualified for benefits under the railroad retirement and social security systems, and a supplemental annuity paid to employees with many years of service. Transfers from Social Security and windfall appropriations from general revenues represented about 41 percent of the program's annual income in 1981. However, in the near future, the retirement account will be unable to pay full benefits. The railroad workers' unemployment and sickness insurance program is financed by taxing employers and borrowing from the retirement account. This trust fund is also experiencing financial difficulties. As a solution to these problems, GAO previously recommended: (1) speeding the transfer for funds under the financial interchange; (2) establishing financially independent trust funds; (3) decreasing windfall appropriations; (4) changing the retirement tax wage base from a monthly to an annual basis; (5) accelerating retirement tax deposits; and (6) eliminating postsecondary student benefits. GAO stated that Congress should consider: (1) clarifying whether the tax revenues on the social security component should be covered under the financial interchange; (2) adopting the option of returning revenues from proposed windfall taxes to the Treasury since such benefits are paid from general revenues; (3) whether returning to the retirement account revenues from taxing the industry pension benefit is an appropriate subsidy; and (4) whether sickness benefits should be viewed in a manner consistent with similar benefits from other programs.