Employee Protection Provisions of the Rail Act Need Change

CED-80-16: Published: Dec 5, 1979. Publicly Released: Dec 7, 1979.

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The Regional Rail Reorganization Act authorized a $250 million fund to pay workers whose compensation or working conditions were adversely affected by the reorganization of bankrupt railroads into Conrail. After more than 3 years, the program showed that costs would be far greater than originally expected. Estimates of the eventual cost ranged from $884 million to $1.7 billion, but none of the estimates could be relied upon as accurate predictions of the total cost. It was expected that the fund would be depleted in late 1979. However, the law required employers to continue paying eligible employees regardless of the state of the fund.

One factor contributing to the high cost of maintaining the protection was the length of time employees were granted protection. Persons who were employed 5 or more years on the effective date of the Rail Act were protected until age 65, while other comparable federally funded employee protection plans limited coverage to 6 years. In addition, the Act did not provide for effective Federal management control and oversight of the program. The nine employers who paid protected employees had to interpret the law, prepare their own implementing procedures and instructions, and disburse Federal funds according to their own interpretations. Although GAO did not identify excessive errors, the program was believed to be too complex and to involve too much Federal money to allow it to continue without adequate Federal control and oversight. It was also believed that the provisions of the law made it difficult to manage properly and produced results not necessarily intended by the Congress.

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