Committee on Interstate and Foreign Commerce, House of Representatives, on H.R. 11607, July 10, 1969, pp. 2-4.) The carriers offered to accept the financing provisions of the bill and to extend the period for the payment of supplemental annuities beyond October 1971, if the representatives of railroad labor would agree to incorporate in the bill "a mandatory retirement program for all employees age 70 or above with provision for scaling down the retirement age to 65 over a 5-year period.” (Id., pp. 53–54.) In my testimony I replied to a question on the carriers' proposal for mandatory retirement as follows:

"Mr. Nelsen. I note that the compulsory requirement feature figures into the deliberations. Has your Board any view on that?

"Mr. Habermeyer. I have not talked to the present Board as such on a formal basis on this subject. It was a matter of concern in the 1959 amendments. I testified at that time that I personally was opposed to a compulsory retirement age being included in a Federal statute or Federal Retirement Act. I am not a lawyer, but lawyers I have discussed this with indicate to me that there is probably a question of constitutionality involved. I think that if the parties want to strike a separate agreement, fine, but I don't think it should be part of the legislation." (Id., p. 10.) On August 4, 1969, Mr. Staggers introduced the bill H.R. 13300, and on August 11, 1969, the House Committee on Interstate and Foreign Commerce reported this bill in lieu of H.R. 11607. (House Report No. 91-464, August 11, 1969, on H.R. 13300.) The House passed the bill, as reported by the Commerce, on September 30, 1969.

PROVISIONS OF H.R. 13300

The bill H.R. 13300 provides for financing the program for supplemental annuities under the Railroad Retirement Act of 1937, as amended by Public Law 89-699, by increasing the taxes paid by carriers for this program. Further, the bill would continue this program through June 30, 1975, and thereafter until changed. Finally, the bill provides for mandatory retirement of all railroad employees, initially at age 70, and ultimately (by January 1, 1976) at age 65.

Any individual employee may, by written agreement with his employer, remain in service beyond the mandatory retirement age, except that the employer may not continue the employee in service beyond such age where safety or efficiency would be adversely affected. This agreement must be in such form as the Railroad Retirement Board may prescribe. In this connection, the House Committee report on the bill H.R. 13300 emphasized "that the Board's responsibility in this regard is limited exclusively to prescribing the form, solely for the purpose of insuring that there be uniformity nationwide of these forms. This arrangement will insure that any litigation, or other controversy, concerning the meaning of individual agreements will be limited in scope, with uniformity of interpretation following thereafter. The Board has no responsibility for administering or enforcing any provision relating to mandatory retirement; this problem is one to be dealt with exclusively by carriers and the individual employees." (Italic supplied.) House Report No. 91-464, August 11, 1969, on H.R. 13300, p. 6.]

The decision that an employee has attained the compulsory retirement age will be made by the employer on the basis of records in its possession. If there should be a conflict between the employer and employee concerning the employee's age, the employee will be able to resort to whatever laws are available to him. The Board's records of the employee's age, as well as the Board's method for determining the employee's age, will be used as under present law without regard to the conclusions of the employer. A report by an employer of service and compensation of an employee will be treated exactly as under present law even though such service is rendered beyond the compulsory retirement age pursuant to an agreement, an error, or otherwise.

By amendments to section 3211(b) and 3221(c) of the Railroad Retirement Tax Act, the bill continues the current excise tax on employer and employee rep resentatives of 2 cents for each man-hour for which compensation is paid through September 30, 1969. For the period commencing October 1, 1969, the rate provided by the bill would be such as to make available for appropriation to the Railroad Retirement Supplemental Account sufficient funds to meet the obligations to pay supplemental annuities under Section 3(j) of such Act as well as the administrative expenses in connection therewith. For this purpose the Railroad Retirement Board would be directed to determine what rate is required for each calendar quarter commencing with the quarter beginning

October 1, 1969. Such determination would be made not later than 15 days before each calendar quarter. Each rate would be sufficient to leave some balance in the Railroad Retirement Supplemental Account at the end of the calendar quarter. Further, in determining such rate, the Board would take account of the requirement to repay the amounts borrowed from the Railroad Retirement Account in favor of the Railroad Retirement Supplemental Account, as provided for in Section 6 of the bill. A notice of the rate determined by the Railroad Retirement Board would be published in the Federal Register, and the Board would notify all employers, employee representatives and the Secretary of Treasury of the rate determined.

A new subsection is added by the bill to section 3221 of the Railroad Retirement Tax Act. Under this new subsection, an employer with respect to employees who are covered by a supplemental pension plan which is established pursuant to an agreement reached through collective bargaining between such employer and its employees would not be subject to the excise tax imposed with respect to man-hours of employment of such employees even though the Board pays to such employees the supplemental annuities to which they are entitled under Section 3 (j) of the Railroad Retirement Act of 1937. To compensate the Railroad Retirement Supplemental Account for the payment by the Board of the supplemental annuities to the employees described in the preceding sentence, this new subsection levies an excise tax on any such employer described in such preceding sentence in an amount equal to the supplemental annuities paid to each such employee of such employer plus a percentage thereof determined by the Board to be sufficient to cover the administrative costs attributable to such payments. Such excise taxes will be due and payable on the first day of the calendar month next following the calendar month in which such supplemental annuities are paid. Section 6 of the bill authorizes the Railroad Retirement Board to request the Secretary of the Treasury to transfer from the Railroad Retirement Account to the credit of the Railroad Retirement Supplemental Account such moneys as the Board estimates will be necessary for the payment of supplemental annuities provided for in Section 3(j) of the Railroad Retirement Act of 1937, for the 6 months next following the enactment of the bill and for the necessary administrative expenses. This section also directs the Secretary of the Treasury to make the transfer required by the Board. This provision is necessary because there will not be sufficient funds in the Railroad Retirement Supplemental Account for the payment of supplemental annuities in at least a part of the first 6 months following the enactment of the bill. The Board would be required, before the expiration of one year following the date of enactment of the bill, to request the Secretary of the Treasury to retransfer from the Railroad Retirement Supplemental Account to the credit of the Railroad Retirement Account the amount previously transferred to the former account, plus interest at the rate equal to the average rate of interest borne by all special obligations held by the Railroad Retirement Account on June 30, 1969, and the Secretary of the Treasury would be required to make such retransfer.

The bill provides a moratorium on amendments to the provisions for supplemental annuities. This appears in Section 7 of the bill which provides that no carrier and no representative of employees, as defined in Section 1 of the Railway Labor Act, could, except by agreement, seek to make any change in the terms governing the supplemental annuities provided under Section 3(j) of the Railroad Retirement Act of 1937, or to establish any new class of pensions or annuities to become effective prior to July 1, 1975. This section also provides that no such carrier or representative of employees could utilize, before July 1, 1974, any of the procedures of the Railway Labor Act to seek to make any such changes, or to establish any new class of pensions or annuities. This section further provides that no such carrier or representative of employees could engage, before July 1, 1975, in any strike or lock out to seek to make any such changes, or to establish any such new class of pensions or annuities. Nothing in this section, however, would inhibit any such carrier or representative of employees from seeking any change in the regular railroad retirement program.

The first sentence of Section 9 of the bill provides that if any provision of the bill as enacted, or the application of such provision to any person or circumstance, is held invalid, the remainder of the bill as enacted, and the application of such provision to other persons or circumstances, would not be affected by such holding. The second sentence of this section provides that in any litigation over the provisions for mandatory retirement provided for in the bill, no court shall issue any order enjoining the Railroad Retirement Board from certi

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fying supplemental annuities for employees entitled thereto under the Railroad Retirement Act as amended by the bill, or enjoining anyone from collecting the excise taxes provided for in the amendments to the Railroad Retirement Tax Act as amended by the bill, or relieving any employer from the payment of excise taxes under such Act as amended by the bill.

VIEWS OF THE BOARD

The Chairman and Labor Member of the Board strongly favor the continuation of the payment of the supplemental annuities, and the financing thereof. as provided for in the bill.

With regard to the provisions in the bill for mandatory retirement of railroad employees the Labor Member of the Board concurs in the views I expressed on this issue in my testimony (as stated earlier) on the bill H.R. 11607, namely, that any such provisions should be incorporated in agreements between railroad management and labor (as they have done in the past) rather than in the Railroad Retirement Act. By enacting such provisions the Congress would be singling out the railroad industry exclusively for such treatment. Private agreements for compulsory retirement are prevalent in many industries, including the railroad industry. The recommendation of the Presidential Railroad Commission in 1962 for compulsory retirement of railroad employees contemplates private agreements for this purpose rather than Federal legislation (House Report No. 91-464, August 11, 1969, on H.R. 13300, p. 32.)

The Board favors the provisions of the bill for continuing the supplemental annuities but does not favor the provisions in the bill for mandatory retirement. The Board believes however that the bill should be enacted even though the Committee believes that such mandatory retirement provisions should remain in the bill. In such case we call attention to the possibility of an employee's attaining the mandatory retirement age before he has completed 25 years of service. Such an employee would not qualify for the supplemental annuity.

The provisions for compulsory retirement, whether incorporated in the bill or in a private agreement between the parties, would add $18.5 million a year on a level basis to the cost of the regular benefits under the Railroad Retirement Act. There is now a deficit in the financing of the railroad retirement system of about 1.16 per cent of payroll, or about $58 million a year, on a level basis. This deficit would be increased to about $76.5 million a year on a level basis, or to slightly in excess of 12 per cent of taxable payroll. A deficit of such size is beyond the range of actuarial tolerance and would require an increase in the income to the system. If the compulsory retirement provisions are adopted either by retaining them in the bill or by a private agreement between the parties, the Board would feel obligated to recommend some time next year that the excise and income taxes on employers and employees, respectively, under the Railroad Retirement Tax Act, be increased by 1⁄2 of one percentage point. The tax rates on employee representatives would likewise have to be increased. Such an increase would reduce the deficit from $76.5 million a year to $26.5 million, which is only slightly above 2 per cent of taxable payroll. A deficit of about 1⁄2 per cent of taxable payroll is considered to be within the range of actuarial tolerance.

STATEMENT OF THOMAS M. HEALY

I recommend enactment of H.R. 13300, as passed by the House of Representatives, without any amendments.

Congress has made the Railroad Retirement Board responsible for adminis tration of the regular and supplemental annuities programs in the railroad industry. Our comments on H.R. 13300 are material insofar as they reflect our expertise gained from exercise of these responsibilities. We have had no responsibilities or experience with respect to programs for the mandatory retirement of older-aged employees. Accordingly, I believe our comments should be limited to the areas of our competence, the funding and management of annuities programs, and that the merits and demerits of other provisions of this legislation providing for establishment of a mandatory retirement program for railroad personnel should be left entirely to debate by those directly concerned. However, since the majority of the Board has raised the question, I feel it necessary to express my own views which are different in some respects.

H.R. 13300 reflects the agreement reached between representatives of the railroad brotherhoods, representing approximately 75 to 80 per cent of current active railroad employment, and representatives of the carriers. Enactment of this

agreed bill would continue the pattern followed by the Congress with respect to past legislation affecting the railroad industry in adopting proposed legislation which has been agreed upon, including the Railway Labor Act, the Railroad Retirement Act of 1937 and Public Law 89-699 which initiated the 5-year supplemental annuities program in 1966.

As the report of Chairman Habermeyer points out, quick legislation is necessary if the present level of supplemental annuities payments is to be maintained. The carriers have indicated their readiness to fund the supplemental annuities at their present levels on a permanent basis, but only if the railroad brotherhoods will agree, as a quid pro quo, to the enactment of the program for mandatory retirement of older railroad personnel which is now embodied in H.R. 13300. Were the Congress to go ahead with enactment of legislation increasing the tax upon the carriers without inclusion of the mandatory retirement provisions, it would be breaking with past practice and, for the first time, be legislating on matters in this area which are traditionally issues for collective bargaining without a foundation of a prior agreement between industry and labor. Enactment of H.R. 13300 accords with past practice and builds upon very broad, if not total, agreement.

In my judgment the grounds advanced by the House Committee on Interstate and Foreign Commerce and by the carriers in support of the inclusion of provisions for mandatory retirement are sound and reasonable. Continuance of the supplemental annuities through October 1976 will cost the carriers over threequarters of a billion dollars more than the contributions the carriers agreed to with the brotherhood in 1966 (Hearings on Railroad Retirement Supplemental Annuities before the House Committee on Interstate and Foreign Commerce, 91st Cong., 1st Sess., p. 53 (1969)). The mandatory retirement program will help offset these increased costs. As the House Committee pointed out in its report on H.R. 13300 (H. Rep. No. 91-464, pp. 7–8) :

"The committee anticipates that the safety and efficiency of railroad operations will be increased as a result, since many jobs, both operating and nonoperating, demand high levels of skills and attention which older employees sometimes find difficult to maintain. Retirement of older employees will open spots for men and women now frozen in jobs with little possibility of advancement, thereby enhancing morale on the railroads, and eliminating causes of friction between employees, and between employees and management, thereby contributing to enhanced labor relations in this industry.

"In making the decision to include provision for mandatory retirement, the committee has been influenced by the fact that mandatory retirement is no innovation in the railroad industry. Testimony presented at the hearings shows that both operating and nonoperating unions have a long history of inclusion of provisions of mandatory retirement in their collective bargaining agreements. The mandatory retirement provisions of the bill follow the pattern set in these agreements. Through the fall of 1967 the operating and nonoperating railway labor organizations had entered a total of 506 different collective bargaining agreements providing for mandatory retirement at ages 65 through 70. Virtually all of the railway labor organizations have at one time or another agreed to the principle of mandatory retirement, and many of them require retirement of their own officers at specified ages, usually age 65.

"In recommending the compulsory retirement provisions of this legislation, the committee has also considered the recommendations of the Presidential Railroad Commission which from 1960 through 1962 investigated virtually every facet of the rules governing operating railroad employees. Based upon that investigation, the Commission recommended a new national retirement rule for mandatory separation of operating employees at 70 years of age with a scaledown provision over 5 years to 65 years of age. The Commission found that mandatory retirement would facilitate orderly adjustment to the declining manpower requirements for operating employees.' The proposed legislation would implement the recommendation of the Presidential Railroad Commission." Chairman Habermeyer refers to a constitutional question in the minds of some attorneys with respect to the provisions for mandatory retirement. My own legal advisors inform me there can be no real question that the Congress possesses authority under Article I, Section 8 of the Constitution which gives it power to regulate interstate commerce to "compel the dismissal of aged employees. . . ." (See dissenting opinion of Chief Justice Hughes, Railroad Retirement Board v. Alton, 295 U.S. 330, 391.) Any questions in this connection

were laid to rest by the decisions of the U.S. District Courts upholding compulsory retirement of air line pilots. See Chew v. Quesada, 182 F. Supp. 231; Air Line Pilots Association v. Quesada, 182 F. Supp. 595, affirmed 276 F. 2d 319. cert. denied, 366 U.S. 962, reh. denied, 368 U.S. 870. The report of the House Committee (H. Rep. No. 91-464, p. 8) indicates that it reached the same legal judgment.

Section 9 of H.R. 13300 includes a carefully drafted severability clause which properly protects the continuation of the supplemental annuities program. In my opinion, that provision makes irrelevant the constitutionality question.

Mandatory retirement legislation is not unique to the railroad industry. Congress in 1920 adopted a mandatory retirement provision for all Federal Civil Service employees. At that time it set the retirement age at 70 but, in recognition of the peculiarly heavy demands of railroad employment, called for separation of railway postal employees at age 62. House Report No. 813, 66th Congress, second session, page 2 (1920). Later Congress set the same age, 62, for the retirement of all employees of The Alaska Railroad, 5 U.S.C. 8335; Act of May 29, 1930, c. 349, § 5, 46 Stat. 468. This legislation provides ample precedent for the mandatory retirement provisions of H.R. 13300.

With respect to the comments of Chairman Habermeyer concerning the present deficit in the financing of the regular railroad retirement system, there is a bill, H.R. 10217, currently pending before the House of Representatives that would increase the earnings of the funds in the Railroad Retirement Account and reduce the actuarial deficiency from 1.16 percent of taxable payroll to 0.80 percent or from $58 million to $32 million per year. That bill also has the joint support of railroad management and railroad labor.

There are clear indications of changes, presumably next year, in taxes and benefits under the social security system and, because of the integration, the railroad retirement system will automatically be involved.

Time is of the essence. H.R. 13300 should be promptly enacted as a mutually satisfactory agreement between railroad management and 75 to 80 percent of all railroad labor. The questions raised in the report of the Board can well be left to the future and its developments.

I so recommend, and, as noted, the majority of the Board also believes that the bill should be enacted even though such mandatory retirement provisions remain in the bill.

Since hearing on this bill is scheduled for October 7, 1969, we have not had time to obtain clearance from the Bureau of the Budget, and consequently no deter mination has been made as to the relationship of this report to the program of the President. The Bureau of the Budget is being furnished copies of the report and you will be informed of the views of that Bureau as soon as they are received.

Sincerely yours,

HOWARD W. HABERMEYER, Chairman.

Hon. THOMAS F. EAGLETON,

U.S. DEPARTMENT OF LABOR, Washington, D.C., November 4, 1969.

Chairman, Subcommittee on Railroad Retirement, Committee on Labor and Public Welfare, U.S. Senate, Washington, D.C.

DEAR MR. CHAIRMAN: This is in reply to your request for our views on H.R. 13300, a bill to amend the Railroad Retirement Act and the Railroad Retirement Tax Act.

H.R. 13300 would not only amend the Railroad Retirement Tax Act to increase employers' payments to the Supplemental Account but would also amend the Railroad Retirement Act to require compulsory retirement for all employees beginning at age 70 in 1970 and working down one year each year until reaching 65 in 1975. The bill would permit agreements by individual employees with their employers to extend service beyond the mandatory retirement age but only when in the judgment of the employer safety or efficiency will not be adversely affected.

As you stated, it is not customary for the Department of Labor to comment on bills covering railroad retirement. Although it is true that H.R. 13300 has features not usually found in bills relating to railroad retirement, we do not believe that the bill raises any question of principle in labor relations nor that the desirability or undesirability of a compulsory retirement in the railroad industry