Keeping the Railroad Retirement Program on Track--Government and Railroads Should Clarify Roles and Responsibilities

HRD-81-27: Published: Mar 9, 1981. Publicly Released: Apr 10, 1981.

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The railroad retirement program is the only federally administered pension plan for a private industry. Funds to finance the program consist of taxes paid by railroad workers and employers, transfers from social security trust funds, and general revenue appropriations from the Federal Government. A review was performed of the Federal role in providing financial assistance to the program and the alternatives available for funding and administering the program.

The railroad retirement program has been inadequately funded, and beneficiaries may receive no benefits or may receive less than their social security equivalent benefits as early as 1982. A primary reason for the overall inadequate funding is that funds from railroad employers and the Federal Government for other benefits have not been adequate to cover the benefits paid. In addition, commingling all of the funds in one account blurs the accountability of each funding source for providing what is needed. Establishing a separate account for social security equivalent benefits would help ensure that beneficiaries will at least receive the equivalent of social security benefits. Because the Railroad Retirement Board uses its own eligibility requirements, railroad workers' remarried widows and divorced spouses do not receive full social security equivalent benefits under the program. Also, the estimated annual cost for funding windfall benefits for the program has doubled from the original estimate in 1974.

Matters for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: When we determine what steps the Congress has taken, we will provide updated information.

    Matter: Congress should consider, as part of its evaluation of the financial condition of both funds, the merits of a more current interchange transfer.

  2. Status: Closed - Not Implemented

    Comments: Congress had an opportunity to consider this recommendation in its actions through the 1983 amendments, but it was not adopted.

    Matter: Congress should reevaluate the issue of how to finance windfall benefits and that, as part of an such evaluation, decide to what extent the Federal Government should fund windfall costs.

  3. Status: Closed - Not Implemented

    Comments: Only the category of widows and divorced spouses was changed in the 1981 amendments; other categories that GAO reported were not changed.

    Matter: Congress should pass legislation, if it is its intent that all persons who would have been covered under social security, except for the railroad retirement program, receive full social security equivalent under railroad retirement, revising the railroad retirement eligibility criteria and benefit structure to ensure payment of such benefits.

  4. Status: Closed - Implemented

    Comments: When we determine what steps the Congress has taken, we will provide updated information.

    Matter: Congress should enact legislation to (1) establish a separate account for social security equivalent benefits and require that funds from social security transfers and employers' and employees' payroll taxes for social security equivalent benefits be placed in the account and be used only to pay the social security equivalent benefits; and (2) require that railroad employers and employees pay taxes for the social security equivalent benefits based on annual rather than monthly taxable earnings as do employers and employees under social security.

 

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