Rail retirement at age 55?

EDITOR'S NOTE: Brotherhood of Railroad Signalmen International President W. D. Pickett has sent this letter to rail union presidents and asked that it be shared with their memberships in order to further the debate on the future of the Railroad Retirement System.

Dear Brothers and Sisters:

We are writing to provide you with an honest and accurate assessment of the discussions taking place this year with the carriers over railroad retirement issues. We believe this unusual communication is necessary to dispel the widespread confusion and misunderstanding about our position on the issues caused by the careless dissemination of misleading and incorrect information.

The current negotiations represent an unprecedented opportunity to make significant changes in the railroad retirement system for the benefit of current and past railroad workers and their families. This situation exists because the Railroad Retirement Account balance is growing day by day, thanks to the sacrifices in reduced benefits and major tax increases paid by rail workers and retirees over the last 18 years.

The carriers want to capitalize on this situation we created. They want to modify the procedures used to invest the money in the Railroad Retirement Account. They believe that a significantly higher amount of interest revenue can be earned if part of these funds were invested in private equities. They believe this additional revenue would allow for a significant reduction in their railroad retirement tax payments.

Labor indicated a willingness to explore the issue of modified investment procedures so long as the carriers understood that they would have to assume the financial risk involved in any change in such procedures, and that any new revenue would be used to make improvements in the Railroad Retirement Act. Namely, labor wants a lower retirement age, improved survivor benefits, other necessary technical changes in the act, and lower direct and indirect employee contributions. The carriers agreed to discuss these issues.

WE SUPPORT REDUCING THE RETIREMENT AGE
We are aware that a reduction in the age at which rail workers can begin receiving full annuities under the Railroad Retirement Act is important to almost everyone and is the most important change we can make. Let us state clearly and unequivocally that we support reducing the age for full annuities to as low as can be achieved while maintaining a solvent railroad retirement system. That includes a reduction to age 55 if that can be achieved while preserving and protecting the financial stability of the Railroad Retirement Account.

At the same time, however, everyone should be aware that no change of any kind could be made to the Railroad Retirement Act unless two conditions are met.

First, the change must be part of a package supported by both rail labor and management. Change can be made only through the legislative process, and in today's political climate Congress will make no change without the full and vigorous support of both parties. Even with joint support, success is not guaranteed.

The second condition is that the change must be part of a package that will leave the railroad retirement system in a stable financial condition. Under no circumstances whatsoever will we support any package unless there is clear and convincing evidence that it meets this second condition. Additionally, it has to be noted that the first step in getting a package through Congress is to get it approved by the House Transportation Committee. That committee is on record that it wants rail labor and management to agree to improve survivor benefits.

Rail labor is now engaged in a legitimate and necessary debate over what size retirement age reduction can be a component of a package that would meet both conditions necessary for enactment into law. Unfortunately, there are some who want to stifle that debate and dictate to all of us what we must do, regardless of the consequences. They will not succeed.

That debate must first acknowledge that a provision allowing employees with 30 years of service to retire at age 55 is enormously expensive.

Even with the additional revenue that would be achieved as a result of modified Railroad Retirement Account investment procedures, the 55 and 30 provision would bankrupt the railroad retirement system unless it were accompanied by a major railroad retirement tax increase of up to $4,000 annually for each railroad worker.

Without management participation in that cost, workers would pay that increase alone. Even with carrier participation, employees would still have to pay a major part of that increase. We are unwilling to ask our members to pay a tax increase of that magnitude for a benefit that not more than one person in every four is likely ever to be in a financial position to utilize.

CARRIERS: THE ISSUE IS NOT ON THE TABLE
Another factor that must be weighed in our debate is that, at a meeting on August 31, 1999, rail labor informed the carriers that it wanted to discuss retirement at age 55 for employees with 30 years of service. The carriers brought that meeting to a halt and said the 55 and 30 issue was not on the table for them under any circumstance. They said they would not discuss it, and would not even agree to any further meetings with labor if we intended to bring that provision up again.

Perhaps the carriers are posturing, but one thing is clear. No crisis or deadline is forcing them to the bargaining table. Any package that does not produce some benefit for them in the form of a tax reduction will not get their support. The growing balances in the Railroad Retirement Account could force a future tax reduction without a labor and management agreement. If the carriers decide to wait for that possible eventuality rather than agreeing now to a package that has no benefit for them, and could even cost them money, the current negotiations would collapse. In that case, legislation would be impossible and there would be no change at all in the retirement age.

Thus, it does not appear that a package containing a provision for retirement at age 55 for employees with 30 years of service could meet either of the two conditions necessary for enactment into law. It would not have carrier support. Therefore, the package would not meet the first condition that it have joint support. Without joint support it could not be enacted into law. Moreover, since we are unwilling to ask all of our members to pay the massive new taxes the 55 and 30 provision would cost to secure a benefit for relatively few, we do not see how a 55 and 30 package could be assembled which would meet the second condition of preserving and protecting the financial stability of the railroad retirement system. We will not support a package that threatens the solvency of the railroad retirement system.

At the same time, we are convinced that a package could be assembled which lowers the retirement age and makes other improvements in railroad retirement while still securing joint labor and management support and protecting the financial stability of the railroad retirement system. Such a package of amendments could be financed by the additional revenue it raises from increased investment yield and would not raise anyone's railroad retirement tax.

We believe we should start working toward a package that restores full benefits at age 60.

WORKING TO RESTORE FULL BENEFITS AT AGE 60
We gave up this benefit as part of the sacrifices we made to shore up the railroad retirement system when it faced bankruptcy in the early 1980s. Because of our efforts, the system is in sound financial condition and it is entirely appropriate that this benefit now be restored.

Moreover, a provision to restore full benefits at age 60 leaves money for other important changes without need of increasing retirement taxes. Survivor benefits could be improved. This is a priority for many members and it would earn support in Congress. The vesting requirement for railroad retirement benefits could be changed from 10 years to 5 years. The railroad retirement maximum, which reduces benefits for spouses of many career railroad employees, could be eliminated. Other important changes could be included. We believe such a package is worth a strong and unified effort by everyone in rail labor.

More than anything else, it is time for everyone to face reality. A package that benefits almost everyone while raising no one's railroad retirement tax is obtainable. A package that is enormously expensive, requires massive new railroad retirement taxes from everyone, and benefits relatively few individuals, is not obtainable. It is clear where our efforts should be directed.

Fraternally,

W.D. Pickett
International President
Brotherhood of Railroad Signalmen