JACKSONVILLE, Fla. — Last January’s liberalizing of retirement benefits for the nation’s railroaders doubled the number of retirees this year, but neither labor or industry officials are voicing any concern, the Florida Times-Union reported.
The increase is the first such dramatic jump in 30 years, railroad officials said.
This year in the Jacksonville area, the number of railroad retirements is projected to reach 350-400, twice the normal figure, said Hank Crowe, district manager of the U.S. Railroad Retirement Board. The majority of the workers are employees of Jacksonville’s CSX Transportation, the nation’s third-largest railroad. CSXT has about 4,100 workers in Jacksonville. And Crowe said 90 percent of his district’s retirees are CSXT employees.
Changes to the benefits, which are administered by the RRB, greeted workers, labor unions and the railroads when Congress agreed to them last December, effective last Jan. 1.
Rail retirement benefits are paid under a program that started in the 1930s. It’s older than Social Security and the two systems have remained separate, although they are coordinated with regard to earnings credits, benefit payments, and taxes. Unlike Social Security, however, the RRB is planning to offset some of the additional costs of the changes by investing some of the RRB funds ($15.6 billion) in potentially more lucrative stocks and bonds.
The railroads stand to gain plenty from the benefit changes. Their longtime, higher-paid employees will be off the payroll, and the jobs, if they are filled at all will be filled by new workers who don’t receive full pay during their first two years on the job.
“It might be a short-term savings, but I haven’t heard my people complain,” Brotherhood of Locomotive Engineers spokesman John Bentley said. “We think it’s worked out for the benefit of our members who have enjoyed retirement after long years [of work].”
The law reduced the retirement age from 62 to 60, with 30 years of service. It also increased the average amount paid to survivors of railroaders by $300 per month. Workers are vested in the system after five years instead of the previous 10.
The Jacksonville area appears to be in line with the national numbers. Railroad retirements in the United States are expected to reach 11,810 this year. Last year’s total was 6,165, RRB spokesman Jim Metlicka said.
The Association of American Railroads, which lobbied for the benefit changes, declined to comment on the effect of the higher numbers.
CSXT is planning for 980 retirements this year, 350 in the Jacksonville area. Company spokesman Gary Sease said CSXT hasn’t decided how many of the vacated jobs will be refilled.
Despite the surge in retirements, the number of retirements in the Jacksonville area would have been greater if the CSX stock price didn’t drop so much this year, said Marilyn DeVries, a financial adviser for American Express.
“When they see the decline in the stock it causes some anxiety,” DeVries said. “So the government is saying, ‘Retire,’ but the price of the stock makes them give pause that their resources aren’t sufficient.”
The declining stock price has caused workers to be anxious about the market in general, DeVries said, but also affects retirement plans directly: CSX matches its workers’ 401(k) contributions with company stock.
The stock price, which was at $41.40 in January, dropped to $25.09 in October and is now hovering at $28
Changes to RRB benefits affect 940,000 Americans, 246,000 active railroaders and 694,000 beneficiaries. Florida has about 8,900 active railroad workers and 34,000 beneficiaries, which includes retirees and their families.
The railroad fund, just like Social Security, is facing the challenge of having more beneficiaries than contributors as the nation’s labor force demographics continue to shift.
But Whitey Westphal, president of the 31,000-member National Association of Retired and Veteran Railway Employees, said the fund has never been in better shape because the new legislation protects it and dictates better investment of its $20 billion.
“This needed to be done to make the trust fund so we wouldn’t have to worry about it,” he said. “We’re just very happy with it.”