ROANOKE, Va. — The U.S. Senate is scheduled this week to vote on whether it should proceed with a
railroad retirement bill that would raise benefits for thousands of older and retired rail workers and cut
taxes for railroads, the Roanoke Times reports.
The legislation, which passed the House 384-33, also would allow the railroad pension system to invest
its funds on Wall Street. But the bill faces fierce opposition from three high-ranking Republicans – Phil
Gramm of Texas, Pete Domenici of New Mexico and Don Nickles of Oklahoma – who argue that taxpayers
would be left holding the bag because the railroads and unions want to take the money out of
government funds and invest it.
The legislation would benefit, among others, at least 4,800 retirees and spouses and 2,500 active
workers in Western Virginia. Railroad workers with 30 years of service could retire at age 60 with no
reduction in benefits.
The Railroad Retirement and Survivors’ Improvement Act of 2001 also would lower the vesting
requirement for young workers to five years of service from 10 years, and give widows parity in pension
benefits. Today, a widow of a railroad retiree does not get the full amount of her late husband’s
retirement. Under the proposed bill, the widow would get the full amount.
The bill also would allow investment of the pension portion of railroad retirement in private securities in
hopes of increasing the rate of return. This, in turn, would support the increase in benefits and would
mean a $400 million annual reduction in railroad-paid employment taxes.
Under the proposed bill, the assets could be invested in a diversified portfolio, as are assets of
private-sector pension plans.
If the fund’s reserves fall below a specified level, then the railroads automatically will be taxed at a
higher rate to offset the shortfall. If there’s a surplus in the funds, the railroads and employees, union
and nonunion, benefit, said Jim Hixon, Norfolk Southern’s senior vice president of administration. “It’s a
win-win situation.”
The bill would transfer some railroad retirement funds — $15 billion — from the Treasury to a board that
would invest the money privately.
The opponents argue that the bill would hurt the government’s budget, leaving taxpayers liable for
bailing out the pension fund if its investments fail and set a bad example at a time when Congress may
need to impose cutbacks in Social Security.
“It’s just pilfering,” Gramm said.
“It’s the railroads and the unions getting together and saying ‘We’ve got $15 billion in our trust fund —
let’s steal it.’ They want to lower the amount of money the railroads put in, increase benefits and reduce
the retirement age. The problem is, it leaves the taxpayer holding the bag.”
But supporters say the trust-fund money was paid in by the railroad workers and that shifting it to a
private investment account was no different from investing money in government securities.
“We’re only changing the form of investment,” Hixon said.
But the Bush administration does not want the government investing the trust fund.
To address those fears, the seven investment directors would be selected by private railroad
management and labor, instead of being appointed by the federal Railroad Retirement Board.
The bill was a milestone for labor and the railroads because they jointly lobbied for the legislation. A
similar bill died last year because four high-ranking Republicans blocked it after it garnered bipartisan
support and passed in the House on a 391-25 vote.
“What hurts our feelings is that we were here with the Republicans at the end of last year. They’re saying
we’re putting our hand out like everyone else since Sept. 11,” Hixon said.