With all the recent talk of Social Security reform, concern is beginning to surface about the prospect that the Bush Administration will see to wrap Railroad Retirement into the Social Security Administration. This could save the government money in by reducing parallel agencies and headcount. Also, grabbing the RRB funds could give Social Security a shot in the arm. Of course, the problem with all this is that both employer and employee contributions to RRB are much higher that corresponding SSA payroll taxes. This is because when the Railroad Retirement System was formed it was intended to not only provide a SS type benefit but also replace existing company pension plans. RRB Tier 1 payments are the equivalent of SS while RRB Tier 2 is the larger portion designed to replace the former company pensions. Obviously a raid on RRB would have railroaders carrying a disproportionate share of payroll taxes while depriving our industry of the federally administered retirement plan which is probably the single largest factor in railroads being able to retain employees over the long term.
This is potentially very negative situation for railroaders individually and our industry as a whole. Even if payroll taxes were reduced in the RR industry, a whole new set of pension or retirement plans would have to be put in place for RR employees which are unlikely to be nearly as favorable as the existing system. In any event, if the status quo is changed it will be negative for all in the system as the security of a government run pension with defined benefits will be destroyed.
This sounds great for the railroads but not its employees. What does Bush have in mind in terms of payment packages and how will they differ with the RRB Tiers?
For years the Social Security fund was a sacred trust untouched by the congress. All of that changed during the Johnson Administration that the funds would be used to pay for the Vietnam war. Subsequent governments can’t seem to leave it alone. Another problem with the Social security fund is that the SSI is being paid out of this fund instead of the General fund as it should be. Many people collecting SSI never worked a day in their lives why should they be a drain on your Social Security. Write your congressman and urge them to take SSI from the General Fund as it should be.
I’m not so worried about the government combining RR Retirement and Social Security. What I’m more worried about is that so many airlines are in financial trouble and may not be able to pay their pension obligations. I’m afraid some congressman will remember that airlines are covered under the Railway Labor Act. He will think, since they are covered by Railway Labor laws, why not add airline employees to Railroad Retirement. Maybe save the airlines some money. Maybe save the government some also by not having to guarantee the pension benefits. Just my thoughts.
Jeff
Hey LC… Wasn’t it just a few years ago we were signing petitions to our congressmen asking them to drop this crap. Are they stupid or just trying to cram it down our throuts regardless of the majority opinion !
Randy
"The financial interchange between the railroad retirement and social security systems is intended to put the Social Security Old-Age, Survivors, and Disability Insurance (OASDI) and Hospital Insurance (HI) trust funds in the same position they would have been had railroad employment been covered under the Social Security and Federal Insurance Contributions Acts. It follows that all computations under the financial interchange are performed according to social security law. The amount of benefits payable under the Railroad Retirement Act has no effect on the results.
The financial interchange provision was introduced by the 1951 amendments to the Railroad Retirement Act and was made retroactive to January 1, 1937. The initial determination covered the period from January 1937 through June 1952 and indicated a balance of $488.2 million in favor of the social security system. Only interest was paid on that amount until the debt was liquidated by subsequent offsets in favor of the railroad retirement system. Since the liquidation of the original balance, annual transfers reflecting the experience of the preceding fiscal year have always favored railroad retirement.
The experience under the financial interchange proved to be more favorable to the railroad retirement system than was originally anticipated. There were two primary causes for this. The first was a series of successive amendments to the Social Security Act which raised benefits immediately while tax increases were deferred. The second factor was the decline in railroad employment, which reduced the taxes payable to social security but had little immediate effect on the benefit reimbursements.
Financial Interchange Determinations
Placing the social security trust funds in the same position they would have been had railroad employment been covered under social security since its inception involves computing the amount of social security payroll and i
I used to live in a country (Singapore) where the social security was that the individual paid his/her own money into his/her own account, not a general pool. That money wasn’t taxed before or after it was put in/taken out. The interest from the money put in could be taxed though. That money in each individual account could be used to pay for a home, car or anything within the law. When you died, upon your will (you could “pre will” it) to anyone that you wanted it to go i.e. family members, charities, etc. the government has no right to take your money even if you have no will; the money goes to your next of kin. If the government were to take that money as my mother puts it: there would be anarchy in the streets.
The way I understand the way all that mumbo jumbo worked was that in fact the RR emploies (sp) donation helped the ss retirement to improve and help the ss to keep solvent. I don’t believe that any of the current RR retires will be affected by any of Bush’s ss acts.
Not quite, John Lea. it also states that taxes haven’t exceeded reimbursements since 1951. When RRB reimbursements exceed RRB taxes (like what is currently happening) money comes from SSI to RRB. That’s why I placed emphasis on the bold print.
SSI is not Social Security. They are funded separately and have quite different eligibility requirements. The confusion is caused by the fact that when SSI was established, the Congress decided that the Social Security Administration would administer it since SSA already had a nationwide administrative structure in place.
The public also seems to have forgotten that Social Security was NEVER meant to be a sole means of support in retirement but as part of a plan that also included a pension from your employer plus personal savings.
Correct. Conversely, Railroad Retirement IS intended to be a sole means of retirement support as it includes both the Tier 1 (SS equivalent) and Tier 2 (Pension equivalent) AND contains very stringent prohibitions against gainful employment after retirement (except for a very minimal amount (about $2,000 annually).